Here’s the Real Problem with the Stock Market

stock market and possible war breakout in the middle east

The stock market panic started on Friday when the Nunes memo was released. It showed high-order collusion between the FBI, the Department of Justice, and the Obama Administration. Officials abused their power to spy on Donald Trump’s transition team.

The goal was to stop Trump from getting elected.

US Republican Paul Gosar said the memo was clear and convincing evidence of treason. He plans to write to the attorney general seeking criminal prosecution against these ‘traitors to our nation.’

House Intelligence Committee Chairman Devin Nunes told Fox News:

We have a clear link to Russia — you have a campaign who hired a law firm, who hire Fusion GPS, who hired a foreign agent, who then got information from the Russians on the other campaign.

It seems like the counterintelligence investigation should have been opened up against the Hillary campaign when they got ahold of the dossier. But that didn’t happen, either.

Ironically, Hillary Clinton — not Donald Trump — colluded with the Russians during the US election. When the news broke on Friday, the stock market tanked. The news was bigger than Watergate.

Who will be implicated this time? No one is sure yet. But the uncertainty led to a market meltdown.

The CBOE volatility index (VIX) flew higher.

Remember, the stock market went straight up for two years. Banks and institutions under-priced risk for months. To account for the ‘extra’ uncertainty, they needed to sell some shares to rebalance their portfolios.

The Dow Jones nosedived by 1,175 points on Tuesday.

It was a short-lived pullback.

The Dow jumped 569 points last night, closing at 24,915 points. It may appear that the correction is over. But the volatility could just be starting, especially if war breaks out in the Middle East.

The risk of war is real

Xinhau reported on 29 January:

Turkish President Recep Tayyip Erdogan has vowed Sunday to clean the long border with Syria of “terrorists,” a move that could increase the risk of a potential confrontation between Turkish and U.S. troops in the war-torn country, said local experts.

Turkey’s Deputy Prime Minister and government spokesman Bekir Bozdag said Monday, the 10th day of the Turkish incursion, that U.S. troops will be targeted if they blend with Kurdish fighters.

Will Turkey and the US go to war?

There’s always a chance.

Erdogan is more dangerous than Syrian President Bashar al-Assad.

He has threatened many politicians around the world to get what he wants. Erdogan is in charge of a NATO state, so he can get away with it. NATO’s nuclear arms also reside in Turkey, giving him a lot of negotiation leverage in any dealings.

To make matters worse, Erdogan gained more power last year. He orchestrated a fake coup not only to put more of his people in charge, but to change laws as well. 

But here’s the catch:

Islamic State (ISIS) is mostly defeated in eastern Syria. The focus has now shifted to the north-western district of Afrin. That’s where Turkey and the insurgent Free Syrian Army are attacking a Kurdish militia group. It’s called the People’s Protection Units (YPG).

YPG is considered a terrorist organisation in Turkey. That’s because of their alliance with Kurdish nationalists. When the Ottoman Empire collapsed, Turkey granted independence to its colonies. The Kurdish people were promised to have their own land. It was to be called Kurdistan.

It never happened.

Kurdish nationalists are still fighting for their freedom.

It’s getting worse

Erdogan is strongly against the nationalists. He won’t give up territory, and considers the YPG a terrorist organisation. Unfortunately for him, YPG is backed by the US. YPG helped the US destroy ISIS on the ground in Syria.

Newsweek explained the problem last Monday:

As the complex politics of northern Syria’s battlefield erupted into bloodshed between two U.S. allies, Central Command Commander General Joseph Vogel told CNN Monday that withdrawing his troops from nearby Manbij was “not something we are looking into,” even as Turkey threatened to advance into the Kurd-controlled city.

Trump urged Erdogan to ‘exercise caution’ last week. But, like most politicians, he probably won’t listen to anyone.

The Syrian war is only getting worse.

If war breaks out in the Middle East between two major countries, gold could explode past US$1,400 per ounce in a day. That’s why you should look at owning a handful of the best junior gold stocks, which are leveraged to the gold price.

Regards,

Jason Stevenson,
Editor, Commodities & Gold Stock Trader

Jason Stevenson

Jason Stevenson

Analyst at Markets & Money

Jason Stevenson is Markets and Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options.

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