Date: August 16, 2021

Lots of Warning Signs Remain But Geopolitics Isn’t Among Them

I have read a number of articles comparing Kabul falling to Saigon falling in 1975. In both cases the markets were nonplussed and behaved within the realm of normalcy. That’s where we are today. Stocks look to open lower, but nothing out of the ordinary. The markets have bigger warnings as I have been discussing for weeks that to worry about an event halfway around the world that has zero economic significance.

Regardless of how you felt about our presence in Afghanistan over the last 20 years, it’s more than a shame that with thousands of Americans dead and countless locals along with trillions of dollars spent, the U.S. leaves and the country is headed back to how it was before 9/11. As the Russians learned in the 1980s, there is no “mission accomplished” when leaving that country. It’s all very sad.

What I find most interesting is that geopolitical events do not seem to have any market impact anymore, at least not when the Fed’s heavy hand is so dominant in the markets. That’s not good nor bad. It’s just a statement of fact.

The stock market remains rife with the same warnings I continue to write about. All year, I have targeted a summer peak by Labor Day that leads to some decline which will not be the end of the bull market. That remains my position. I have thrown out 7-11% as the magnitude for the bout of weakness, but as longtime readers know, I am not as great with downside projections as I am with upside ones.

To close last week, I definitely did some pruning and selling, reducing but not eliminating our position in energy. That leaves all of our equity strategies with some level of cash that I am in no hurry to redeploy unless we see some market weakness or repair of some of the warnings signs.


Paul Schatz, President, Heritage Capital