Stocks Don’t React to Crimea News

After the news about Crimea’s vote to leave Ukraine and join Russia, there was the possibility of seeing a reaction in the stock market. However, people are relieved to see that the U.S. stock market rose, despite potentially-problematic political tensions with Russia. It seems like for now, the situation is not severe enough to prompt a significant disruption in the market. A Wall Street Journal article explains that “the outcome matched market participants’ expectations… prompting investors to unwind cautious bets meant to protect against potential market-spooking headlines. Looking ahead, investors are awaiting details of any economic penalties to be imposed on Russia by Western leaders, who have said a Russian annexation of Crimea would be illegal.” This morning, the official sanctions were announced by President Obama: “sanctions on specific individuals responsible for undermining the sovereignty, territorial integrity and government of Ukraine…second, sanctions on Russian officials — entities operating in the arms sector in Russia and individuals who provide material support to senior officials of the Russian government.”

The sanctions are very limited, only concerning specific individuals tied to Putin’s government. So the stock market, in ignoring the Crimea news, is not likely to be affected by this announcement either. “U.S. stocks climbed, rebounding after last week’s selloff, as investors took Crimea’s widely expected vote to secede from Ukraine in stride.” The Dow Jones Industrial Average rose 192 points, or 1.2%, to 16259 in today’s trading. The S&P 500 rose 18 points, or 1%, to 1860. The Nasdaq Composite Index also rose 45 points, or 1.1%, to 4290.

And good indicators continue to pronounce themselves in favor of recovery. Federal Reserve data showed U.S. industrial production rose 0.6% in February (which was higher than expected). Capacity utilization increased to 78.8% (a slight, but important change). Alan Gayle, director of asset allocation at RidgeWorth Investments, says that the data supports the notion that U.S. economic growth is still on track, and a series of weak points around the start of the year were mostly about severe winter weather than a falter on economic recovery.

Thus, the good news today is two-fold: stocks rose despite the news from Crimea (which is a good sign persistent, stable recovery) and the recovery seems to be strong. At this point, growth is slow but steady – which may be exactly what the economy needs. If we saw excessively-fast growth and stimulus, we would be more concerned with inflation than the economic recovery. It is best to focus on this kind of current growth, which seems to be relatively stable.