The robbery of Cypriot citizens was announced over the weekend a week and a half ago. European stocks have been getting hit accross the Eurozone with particular angst against European bank stocks (rightfully so). The US market, on the other hand, is as resilient as ever with the S&P a few points from its nominal high. This morning’s action made us feel that US equities were going to take their turn at the whipping station, but have since rallied back to 1560 on tyhe S&P 500. Two obious divergences are in the US dollar and the US treasury market with the 10 year treasury down almost 8bps to 1.83%
US Equities No longer care about Cyprus
There have been many times when I have heard traders, PM’s and investors state that, “when the Eurozone flares up, it just drives more international investors into US assets including equities”.
This statement on its own might drive up the dollar and bond prices, but I find it to have no lasting permanence. Fear and loathing in the members of the European Union and more specifically those of the Eurozone will spread everywhere. Over 45% of the S&P 500’s revenue is derived from foreign countries and over 11% of that comes directly from Europe.
It seems to me that there is little value in looking for a gust of tailwind in US equities versus waiting to see how this rather large political situation plays out.
