The rights of bragging for the hottest stock market in the world this year belong to an amazing leader: President Vladimir Putin of Russia.
The combination of rising prices of Russian stocks and the ruby rush generates some of the best investment income on earth in 2019. In dollar terms, Russian stocks have risen by more than 28% (and more if you consider dividends). The S & P 500, on the contrary, grew by more than 16%.
There are fundamental economic reasons for the Russian rally, especially for the recovery of the price of crude oil which is the cornerstone of the country's economy. But the strong performance also reflects growing investor confidence that the United States government will not take further action that would jeopardize Russia's economy. Bush, Senior Analyst at Eurasia Group, a consulting firm. "Last year, the alarm for new US sanctions against Russia was very intense."
The country's stock exchange fell by more than 15% in dollar terms. Prices also fell on the bond market, making it more expensive for people and businesses to borrow money. As it emerged from the capital, the ruble collapsed by about 20%.
Months ago, when relations between Russia and the West worsened, investors prepared for even worse news. "This is a country that can not be invested, so investors are looking at it last year," said Lale Akconer, global market strategist at BNY Mellon Investment Management.
But things were thirsty. In January, the Treasury Department lifted sanctions against a number of Russian companies. The State Department did not impose an expected second round of sanctions relating to the poisoning in March 2018 in Britain of a former Russian intelligence agent. And Congress's legislation aimed at punishing Russia stopped.
"These big sanctions for the financial sector that people worry about – have never been realized," said Jacob Funk Kirkegore, senior research fellow at Peterson's Institute of International Economics.
This has prompted investors to think about the fundamentals: a Russian market where stocks have been cheap after last year's sell-off, especially in light of a more than 45% increase in world oil prices earlier this year. This meeting helped increase the value of the ruble and stop sliding the stock market in Russia, whose value is in the energy companies. "If oil performs well, Russia is doing well," says David Hauer, Markets. strategist at Bank of America Merrill Lynch. Analysts raise their expectations for Russian company profits this year, and some of these companies derive wealthy dividends from shareholders. (The dividend income of the MSCI Russia index is three times higher than the S & P 500 index.) The relative isolation of Russia from the US-China trade war is another point of sale.
But the buyer has to be careful: although there are good years, the Russian stock market is known for its volatility. Making money requires impeccable timing.
While the Russian economy is tied to exports of goods, the country's foreign policy has been in conflict for years with its main trading partners in the European Union. In the long run, the post-Soviet Russian government has repeatedly turned to a policy of weakening the ruble to cope with the economic turbulence that damages dollar-denominated investment.
The RTS, which measures Russian dollar shares in dollar terms, is still around 45% of its peak in 2008
And the Russian economy shows signs of cooling by growing only by 0.5% in the first quarter in 2019 compared to the previous year.
"One thing about Russia is that there are always surprises," said Mr Bush of the Eurasian group. "And they are almost always negative." Andrew E. Kramer contributed to the report.