Go with Russia

Since my call for Russia stocks (RSX) almost 2 years ago, it has shot up nicely, especially with over 20% gains within a few weeks following Trump’s victory in election. As I said, it was too fast too soon and I expected some cooling after that jump. Indeed, it has declined over 10% since my call. Now I think RSX correction is likely over and is poised for another leg up. Let me explain.

The initial positive move for the Russia stocks was largely due to the expectation that Trump’s administration would have more productive relationship with Putin’s but this positive expectation has basically gone. The dirty politics in Washington has virtually made it impossible for Trump to do anything constructive in terms of improving the relationship with Russia, at least in the foreseeable future. It has been a constant non-stop flow of bad news for Russia regarding its worsening economic situation as well as major geopolitical challenges facing it. It seems Russia is dead economically and no one is interested in it anymore. Naturally all the bad news conceivable has likely already been factored in for the Russia stocks but RSX has refused to go down further from the current level around $20. Here is the thing: when the worst is expected, anything less bad could trigger a sharp up-run quickly. I think RSX is good one for diversification purpose when the US stocks are already so high for so long. It also pays a respectful dividend close to 2%. Russia is one of the emerging markets that may happily surprise people over the next few years!