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Are Markets Too Complacent Amid Geopolitical Unrest?

A frequent question were receiving from investors is whether markets are too complacent in the face of rising geopolitical unrest, whether it is in Ukraine, Iraq, or the situation in Israel/Gaza.

It is helpful to view the markets response to unrest through the lens of the energy markets. Historically, unrest involving Russia or the Middle East might negatively affect the U.S. economy or corporate earnings through a spike in energy prices. Today, however, increased domestic energy production means the U.S. is less vulnerable to external oil shocks (chart).

In short, overseas unrest still matters for U.S. markets, but less so than in the past. In this sense, the markets muted reaction to worrisome headlines seems appropriate.8.4.14

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