This month, in Oslo Norway , the Nobel Prize Committee is meeting to consider a record 278 nominees for the peace prize. Vladimir Putin is also among the nominees, who of course is now at the center of one of the world’s most recent crisis — Ukraine. Mr. Putin has been nominated by the International Academy of Spiritual Unity and Cooperation Among the Nations of the World, for his efforts in brokering a nonmilitary solution and averting of an air strike on Syria after the chemical gas attacks in August 2013.
Mr. Putin’s Ukraine move — much different from his Syria move — has created a ton of market volatility and put markets on edge earlier in the week. The S&P500 recorded its biggest drop in the month on March 3rd on concerns Russia’s military presence in Ukraine could lead to a broader conflict. But later the index rallied 1.5% to an all-time high the next day — after Putin’s remarks easing the tension.
It seems the markets around the world have looked through this week’s geopolitical crisis as the U.S. stocks soar and financial data overshadowed Ukraine tensions. Better-than-forecast data on hiring — U.S. employers added more workers than estimated in February and manufacturing data as reports indicated expansion and faster than projected growth, fueled optimism in the economy and overshadowed concerns on Ukraine.
I am still concerned about China’s economic growth, growing problems in Brazil, disappointing economic growth in Russia and India. I believe if the Ukraine crisis continues, portfolio allocations for emerging markets will drop even further. But let’s not forget that negative sentiment has made many emerging markets cheaper. I continue to believe that emerging markets look very good, but that doesn’t mean that we are going to do well in them over the short-term.
I also agree this week’s data overshadowed Ukraine crisis and helped the markets. But the crisis is sending the Volatility Index (VIX) upward. Extreme as market fluctuations may be, there is a good chance that they will continue because the problems in Ukraine and Russia are far from settled. Therefore high volatility is likely to continue in other emerging markets. Despite the good news in the market, Mr. Putin is submerging hopes in emerging-market investments as volatility and geopolitical risks are on the rise, at least in the short-term. The longer-term view, however, looks considerably better. I believe, investing in the emerging markets makes a great deal of sense but not gambling on their short-term political risks.
Over the next few months we will see more ups and downs in markets around the world, and the Nobel committee will cut its list to 40 nominees, then 20, and eventually 10 or so. No one outside of the committee will know how long Mr. Putin remains in the running. But I highly doubt the committee will consider him in the short list. I think Mr. Putin would have been a real contender for Nobel “Piece” not Peace Prize — A piece of Georgia and now a piece of Ukraine.