As far as stock markets are concerned, geopolitical disruptions are basically the same no matter who the players are.
That’s the takeaway from TheStreet’s James “Rev Shark” Deporre, who says the stock market has already largely discounted a Russian invasion of Iraq.
The Russian aggression in Eastern Europe harkens back to a similar market scenario almost two decades ago.
“While I don't particularly like historical comparisons, it is interesting to look back to March 20, 2003, which is the day that the US invaded Iraq,” Deporre wrote at the time of Russia's invastion on Real Money. “That was the exact bottom of the bear market that started when the Internet bubble popped in 2000.”
“There are big differences between that situation and the current one, but it illustrates how the market functions as a discounting mechanism and does a good job of anticipating negative events before they actually occur,” he added.
The big question now is whether the ongoing uncertainty is going to continue to weigh on the market.
At the time of Russia's invasion, “a big drop on the news would have been an interesting 'buy the bad news' situation, but now the more mild response is problematic as it creates the potential for a more negative market reaction as further negatives develop,” Deporre said.
Many stocks that have no exposure at all to Russia or Ukraine have been hit hard simply because the market as a whole has been hit. For example, biotechnology, growth and cannabis names sold off for no reason associated with their fundamentals.
That scenario may lead traders to start looking for bargains again, now that the Ukraine issue is not pressuring the market to the same degree. “We’ll have to see if and how that action develops,” Deporre added.
