Plenty of new stories have discussed how the ousting of the Tunisian dictator Zein al-Abidine Ben Ali and the protests in Egypt against President Hosni Mubarak may impact local politics, and those countries' relationships with Israel and the West.
But there is little analysis in the mainstream press regarding any impact on local financial markets.
The February issue of Elliott Wave International's Asian-Pacific Financial Forecast fills that gap.
The Asian-Pacific Financial Forecast editor Mark Galasiewski answers this question via an interesting example:
...after similar violence surrounding the 2009 low in Iran’s stock market -- when protesters similarly called for the nation’s ruler to step down -- the TEPIX boomed.
In fact, at the time, we predicted in the July 2009 [Asian-Pacific Financial Forecast] exactly that outcome, saying “Iran holds the potential for even greater violence. But with a fifth wave up likely already under way, a wave of acceptance should eventually replace the current anger.”
You see, Elliott wave analysis doesn't simply "assume" that political instability is bad for stocks. Instead it asks the question: How do social events -- like Egypt's protests -- fit into the stock market's Elliott wave pattern?
It's important, because stock market trends reflect prevailing social mood. What's more, a change in social mood comes before social change. That's indeed been the case in Tunisia, where Zein al-Abidine Ben Ali left the office near the end of a decline in the Tunis SE Index -- not the start of the decline, as conventional economics would have you think.
Does this mean that just as in Iran two years ago, stocks in Egypt, Tunisia and their neighbors will "brush off" street violence and rally? See their Elliott wave labeling in the February Asian-Pacific Financial Forecast to find out. Start your risk-free, instant-access subscription now and see the charts on your screen in minutes.