If You Own the S&P 500, You’re Betting on These Three Outcomes… Whether You Know It or Not
So… why did the S&P return from its barbecuing and parade-watching on Memorial Day to surge to another new all-time high?
Street economists credited it to the increase in durable-goods orders:
- but that’s a hoary answer exhumed to cover up economists’ shared inability to explain the stock market’s idiosyncrasies on a day devoid of big news;
- durable-goods orders are lumpy and notoriously subject to massive restatements, so they almost never produce a widespread lust to buy stocks.
Other answers are equally unsatisfying:
- it’s not as if a 3-day weekend was enough time for investors to plow through all the bulky weekend papers to find reasons to rush into stocks;
- and it’s getting tiresome to hear the argument that 0 returns on cash and piddling returns on Treasuries render stocks the default option. Everybody already knows that.
So why the high?
A clue came from the simultaneous sell-off in gold, which drove bullion through its support level to its lowest price in nearly 3 months.
There was near-zero doubt that this breakdown occurred because
Ukraine produced its first really good news in nearly 3 months:
- not only had the Ukrainian elections gone off with large turnouts and no claims of fraud,
- but the previously pusillanimous central government had deployed gunships and paratroopers to dispatch the Russian-backed occupiers of Donetsk airport, killing dozens;
- this was the first military victory for the nation since Vladimir Putin and his KGB and military troops began cowing and conquering Ukraine;
- the previously all-conquering Putin responded by merely demanding a halt to the killings.
The twin triumphs—at the polls and at the airport—unleashed a massive sigh of relief. Naturally, US equity investors celebrated. The Putin problem was no more.
Vlad had been had.
Or so it seemed to Wall Street, which was ignoring a potentially bigger story: the game-changing European Parliamentary elections.