Falling Markets Cause Rising Tensions

Updated on

The disappearance and possible murder of Washington Post reporter Jamal Khashoggi is dominating the recent news cycle. But the resulting U.S. – Saudi Arabia tensions did not cause the collapse in Saudi equities nor any move in crude oil. As is usually the case, it’s the other way around.

Recent headlines reflect conventional thinking: “U.S.-Saudi Tensions Pushing Stocks Lower” and “Oil Prices Waver On U.S.-Saudi Tensions.” The mainstream default position is that “news” or “events” cause markets to move. Prechter’s Socionomic Theory of Finance, however, clearly proves that news has no bearing at all on markets. In fact, the social actions that cause news stories tend to come after markets have already moved.

Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q3 hedge fund letters, conference, scoops etc

Oil prices have been rising for months. The Saudi Arabian Tadawul All-Share index most recently topped out in July, but it was already down 60% from its peak twelve years ago. We warned readers on 8 October that another declining wave in the Saudi Arabian index was probably starting. And, we anticipate a continued decline in the weeks ahead, regardless of the outcome of the situation with the missing journalist.

Stock markets reflect social mood; declining stock markets reflect negative mood. Increasing tensions in relations, be they political, commercial or personal, are symptoms of this negative trend in mood, not the cause.

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!