It's the EU Stupid

German Campaign Turning into a Debate Over Europe

In six months, Germany will go to the polls in a showdown between Chancellor Angela Merkel and her Social Democratic challenger Martin Schulz. One issue is set to dominate the campaign: What to do about the European Union. By SPIEGEL Staff

 Photo Gallery: EU Issues Dominate German Election

Around the same time that the British representative in Brussels handed over the letter officially notifying the European Council of the UK's intention to leave the EU, in late March, ambassadors of the 27 remaining member states were meeting a couple of floors below. They planned to discuss the post-Brexit future of the European Union over lunch. To focus the conversation, the European Commission had posed a concrete question for the ambassadors to debate: Does the bloc need to become more socially minded?

All of the ambassadors present had their say, with a wide variety of proposals ranging from an EU tax to a standard minimum wage to joint European unemployment insurance. Only the German representative had nothing to say. The German government's position, he said, hadn't yet been determined, he told his puzzled counterparts.

The delay wasn't the experienced ambassador's fault. The blame lay with a burgeoning dispute in far-off Berlin, between the Chancellery of Angela Merkel, of the center-right Christian Democrats (CDU), and the Foreign Ministry of Sigmar Gabriel, of the center-left Social Democrats (SPD). An internal government paper described a "fundamental disagreement": While Gabriel's officials were insisting on "introducing proposals from Germany," the Chancellery was opposed to going beyond statements that had already been made.

The two sides in the dispute were unable to reach an agreement, resulting in silence.

With six months to go before parliamentary elections in Germany, the SPD is seeking to pressure Merkel on an issue on which she had long seemed invulnerable: the European Union.

Until recently, the chancellor had looked like the most powerful politician on the continent, a leader who had managed to keep the bloc together through all manner of crises by moving carefully and deliberately.

But then her refugee policies turned half of Europe against her. And now she finds herself facing Martin Schulz in the race for the Chancellery, a man who is deeply committed to the EU and who has the Brussels system to thank for his political ascent. Moreover, like Helmut Kohl, Schulz is more than willing to open Germany's checkbook if it means keeping the EU together.

Since Schulz's nomination by the SPD, Merkel's coalition - which inconveniently pairs her conservatives with the SPD - has been consumed by discord. Schulz and Gabriel are demanding that the austerity requirements imposed on debt-consumed southern European member states be relaxed. They want more money made available for the EU budget and are demanding that the EU's mandate be expanded with the inclusion of a "social dimension." Awkwardly for Merkel, the same demand has been made by European Commission President Jean-Claude Juncker, who is a center-right ally to the CDU, and by the heads of government of many Mediterranean member states, which dream of a joint insurance system and minimum labor market standards.

Every euro for the EU "comes back to us several fold," Gabriel wrote recently in a contribution for the daily Frankfurter Allgemeine Zeitung. And Schulz intends to make clear that Social Democrats won't simply "capitulate to the pressure to lower social and ecological standards."

At issue are the consequences of Brexit, the future of the EU and, not least, the question as to who better taps into the mood of the electorate. Gabriel and Schulz believe that Germans, in the age of nationalism and populism, are prepared to sacrifice more financially for Europe. The chancellor, by contrast, is opposed to transferring more social competencies and the money that would require to Brussels. Instead, her circle is repeating vocabulary such as "reforms" and "competitiveness" while pointing to the most recent surveys. Those polls show that a clear majority of Germans are opposed, for example, to providing Athens with yet more aid.

The Greek Question

It's no wonder that the flames of the conflict are being fanned by the never-ending discussion over Greece. For months, international backers have been negotiating with the deeply indebted country over the same old scenario: Athens is lagging on its reforms but will soon need fresh billions from the European bailout funds.

Finance Minister Wolfgang Schäuble and his counterparts in other EU member states are insisting on further austerity measures. They would like to see Athens reduce the tax-exempt income amount and make further pension cuts to produce higher budget surpluses in the coming years.

But Greek Prime Minister Alexis Tsipras is not prepared to do so, with elections approaching in 2019, and has found surprising support in Berlin. At one point, Foreign Minister Gabriel supported the idea of Greece leaving the eurozone, but recently, in a discussion prior to a recent cabinet meeting and again by telephone during the following weekend, he urged Merkel to make concessions to Tsipras. "I don't think it is particularly intelligent for us to have forced Greece to cut pensions by 40 percent with three adjustments within just a few years," Gabriel says. Plus, he adds, the country is now producing budgetary surpluses.

Germany's SPD has identified Finance Minister Schäuble as their preferred target. "Schäuble wants to bring Greece to its knees," Schulz has grumbled. Even the International Monetary Fund, whose advice has long been important for the CDU, wants to give Athens more flexibility, Schulz says. "Now Schäuble is fighting against the IMF," Schulz continues. "The finance minister only accepts expert advice from those who agree with him."

The dispute over Greece is merely a precursor to what Merkel can expect from the SPD when it comes to EU issues in the campaign. Foreign Minister Gabriel sees two reasons why it is time for his party to assert itself when it comes to Europe. For one, he believes it was a mistake for his predecessor at the Foreign Ministry, fellow SPD heavyweight Frank-Walter Steinmeier, to cede European policy to Merkel virtually without dissention. For another, the minister believes the mood is changing in the country, especially now that thousands of people are marching every weekend in pro-EU demonstrations across Germany and Europe. "There is significant support for Europe on the center-left," says Gabriel. "I think it is possible to win an election on appeals for a more socially minded Europe."

Schulz and Gabriel have agreed on a division of labor. Since his nomination, Schulz has been reserved when it comes to European policy in order to increase his profile on domestic issues. Gabriel, meanwhile, as a cabinet member, is leading the charge against the finance minister. "When Schäuble says 'money alone is not enough,' I counter by saying: 'Austerity alone also isn't enough,'" Gabriel says.

Because UK's departure has torn a hole in the EU budget, Gabriel says, Germany must be prepared "to increase its share." He is also considering the idea of creating a budget for the eurozone that could "for example be financed by higher taxes on the financial markets."

Gabriel wants to stage his pro-EU campaign as an ideological conflict over social issues. "The conservatives are in favor of the most economic competition possible," he says. "We Social Democrats are in favor of an EU pursuing the harmonization of living conditions."

A Social Approach to the European Unión

Gabriel has tasked Foreign Ministry officials with actively shaping the Brussels debate with the inclusion of "pillars of social rights." The paper that was drafted in the ministry calls for "more money for education, mobility and research," among other things. According to the paper, money from the EU budget should be used for the fight against youth unemployment and to combat "developmental shortcomings in poorer regions." All of the portfolios that contributed to the document, including Schäuble's Finance Ministry, agreed to the document's language, but Merkel's Chancellery struck the most decisive sections, including both the broader statements regarding the EU's social dimension and the specific proposals for the upcoming EU budget.

It is clearly a significant conflict over policy direction, but whereas she has avoid conflict in previous such disagreements, Merkel is intent on joining the fray this time.

She agrees with Gabriel that there is a growing sympathy for Europe among large sections of the population. But she doesn't believe that it can be translated into votes in the way the SPD intends, and Horst Seehofer, head of the CDU's Bavarian sister party CSU, agrees with her.

Germans are certainly prepared to demonstrate solidarity with Greece and other countries if they truly pursue reforms, one senior CDU member says. "But I don't think people are waiting to finally spend more money on Europe." He says that Gabriel has gone too far with his demands, given that it is irresponsible to weaken one's one negotiating position on behalf of the Greeks.

Nevertheless, Gabriel's offensive is not inconvenient for Merkel. It makes it easier for her to appeal to grassroots conservatives by campaigning against the SPD's desire for a stronger social net and wealth redistribution. And she can present herself as the middle ground between the SPD, which seeks to solve Europe's problems with reforms and more money, and her party ally Wolfgang Schäuble, who remains in favor of pushing Greece out of the common currency.

It allows her to play her favorite role: the voice of reason.

"A campaign focused on Europe is fine with us," says European parliamentarian Manfred Weber, who is floor leader for the center-right European People's Party in Brussels and a member of the CSU. "We have the support of many voters. Martin Schulz has to declare whether he still thinks that the EU's problems can be solved with more money from Germany."

Even if Germany is of two minds when it comes to showing more solidarity with other EU member states and strengthening social policy, in most other EU countries, the Commission's plans are welcome. In late April, Commission President Jean-Claude Juncker is planning to present concrete proposals for his "European Pillar of Social Rights." "We will be proposing minimum standards," Juncker said during a recent visit to Malta. In November, he is planning on hosting a "social summit" in Stockholm together with Swedish Prime Minister Stefan Löfven.

Juncker continues to be bothered by the fact that millions of mostly young people are still out of work in southern European countries like Greece, Spain, Portugal and Italy. "What is the European Union doing for young people?" is a question that he is often asked in town hall meetings. Juncker believes that a stronger EU focus on social issues is a logical complement to the eurozone.

The commission president initially envisions a greater alignment among countries belonging to the eurozone, with a joint job placement initiative for youth, for example, along with the introduction of minimum salaries in each EU member state.

An Unconventional Campaign

As the first draft of his European Pillar of Social Rights from March 2016 shows, Juncker has set his sights high. The document addresses a comprehensive package of social rights and proposals to create equal opportunity on the job market along with minimum salaries, unemployment benefits and health care. The Commission president hopes that such proposals could take the wind out of the populists' sails. It bothers him, to be sure, that he must continually make exceptions to the Stability and Growth Pact for countries like Spain, Portugal and France - but, he wonders, isn't that better than having Front National win the French presidency?

Merkel's Chancellery views the proposals coming out of Brussels with concern. And the significant disagreement triggered by the Italian government ahead of the recent celebration of the 60th anniversary of the Treaties of Rome remains a sore spot. The Italians sought to formulate the summit declaration in such a way that it reflected Juncker's more socially-conscious vision for the future of the EU. Berlin, though, was adamantly opposed. Ultimately, EU capitals agreed on the formulation: "In the 10 years to come, we want a Union that is safe and secure, prosperous, competitive, sustainable and socially responsible."

The Chancellery sees the declaration as the end of the debate. Juncker, Gabriel and Schulz, by contrast, see it as the beginning.

Germany, as a result, is facing an unusual campaign. The standard conflict between the market and the state will be front and center, but this time it will be focused at the European level. The crucial question is: Are Germans prepared to show more solidarity with Europe? And if so, what do they expect in return?

The answers to those questions may not just determine who will become Germany's next chancellor, but also decide the political fate of the entire continent.

By Horand Knaup, Peter Müller, Ralf Neukirch, Christian Reiermann, Michael Sauga and Christoph Schult

Trump’s road does not lead to Rome — or to Pope Francis
Missing Vatican trip off Italy schedule marks break with presidential tradition

 Donald Trump has no plans to meet Pope Francis during his maiden trip to Italy as president next month, according to officials © Reuters; Getty Images

When Donald Trump visits Italy for the first time as US president next month, one meeting will be conspicuously absent from his itinerary: he has no plans to meet the Pope, according to US and Vatican officials.

Mr Trump will be in Sicily for the G7 summit. Unless he changes his mind, he would become the first US president since Franklin D Roosevelt to make his maiden official voyage to Italy without seeing the pontiff.

Officials on both sides insist that the lack of a meeting should not be seen as a snub by Mr Trump or Pope Francis. They deny that it reflects a wish to avoid an awkward encounter between two leaders at odds over big global challenges such as migration and climate change and who clashed indirectly during the 2016 presidential campaign.“

The meeting will happen, just probably not this time,” said one Vatican official.

Logistical difficulties are a plausible explanation. Sicily is roughly an hour’s flight from Rome, so Mr Trump would have to go out of his way to visit the Vatican, unlike his predecessors who have gone to the Eternal City for meetings with their Italian counterparts. In addition, the summit is sandwiched between a Nato meeting beforehand in Brussels and the Memorial day holiday in the US.

Nevertheless, the tension between the two men is evident. Unlike Mr Trump, who signed executive orders halting immigration from several mainly Muslim countries and opposes the Paris climate deal, Pope Francis has been an ardent supporter of liberal migration policies that do not discriminate on grounds of religion and of bold action to tackle climate change.

Pope Francis even made a trip to the US-Mexico border during the Republican primary contest last year, which was seen as a direct challenge to Mr Trump.

When he said that “a person who only thinks about building walls . . . is not a Christian”, Mr Trump responded that the comments were “disgraceful” and suggested the Pope would be thankful to have him as president because he could defend the Vatican from Isis terrorists.

In recent months, the US Catholic bishops’ conference has explicitly attacked some of Mr Trump’s actions, including the travel ban and the executive order on the environment, which rolled back a crackdown on carbon emissions from power plants.

Recently in Rome, Cardinal Peter Turkson of Ghana, a close ally of Pope Francis, said that he was “full of hope that things will change” when it comes to Mr Trump. “Luckily, there are countervailing voices who disagree [with him],” Cardinal Turkson added. A day later, though, he rowed back. “Putting the Vatican against President Trump is at the very least exaggerated,” he said. “The US has a valid, democratic government that needs to be respected.”

One US official agreed. “There is a narrative of conflict in the media between the president and the Pope but the Church is spiritual and ecclesiastical, it’s not political.”

As well as social issues such as abortion, where Pope Francis may be more aligned with Mr Trump than he was with Mr Obama, there could also be some areas of convergence, such as on fighting human trafficking and crafting a diplomatic solution to troubles in the Middle East and Latin America.

Mr Trump’s predecessor Barack Obama met Benedict XVI in 2009 on his first trip to Italy, and before him George W Bush met John Paul II in 2001 on the first of several visits to Rome. Back in 1969, Richard Nixon dashed off to France to meet president Charles De Gaulle after meeting Italian leaders in Rome but quickly flew back to see Pope Paul VI. The first Roman Catholic US president, John F Kennedy, met Pope Paul VI shortly after his election in the summer of 1963.

It was Mr Roosevelt who visited Italy for the last time in an official capacity without seeing the Pope. In 1943, at the height of the second world war, he travelled from Malta to allied military installations in Castelvetrano, Sicily, then dashed off to Senegal. While the Vatican was technically neutral at the time, Rome was under German occupation.

Way back in 1919, Woodrow Wilson was the first US president to ever travel to Italy, seeing Benedict XV while there.

A Fiscal Reality Test for US Republicans

Nouriel Roubini

Donald Trump speech

NEW YORK – US President Donald Trump’s first major legislative goal – to “repeal and replace” the 2010 Affordable Care Act (“Obamacare”) – has already imploded, owing to Trump and congressional Republicans’ naiveté about the complexities of health-care reform.
Their attempt to replace an imperfect but popular law with a pseudo-reform that would deprive more than 24 million Americans of basic health care was bound to fail – or sink Republican members of Congress in the 2018 mid-term elections if it had passed.
Now, Trump and congressional Republicans are pursuing tax reform – starting with corporate taxes and then moving on to personal income taxes – as if this will be any easier. It won’t be, not least because the Republicans’ initial proposals would add trillions of dollars to budget deficits, and funnel over 99% of the benefits to the top 1% of the income distribution.
A plan offered by Republicans in the US House of Representatives to reduce the corporate-tax rate from 35% to 15%, and to make up for the lost revenues with a border adjustment tax, is dead on arrival. The BAT does not have enough support even among Republicans, and it would violate World Trade Organization rules. The Republicans’ proposed tax cuts would create a $2 trillion revenue shortfall over the next decade, and they cannot plug that hole with revenue savings from their health-care reform plan or with the $1.2 trillion that could have been expected from a BAT.
The Republicans must now choose between passing their tax cuts (and adding $2 trillion to the public debt) and pursuing a much more modest reform. The first scenario is unlikely for three reasons. First, fiscally conservative congressional Republicans will object to a reckless increase in the public debt. Second, congressional budget rules require any tax cut that is not fully financed by other revenues or spending cuts to expire within ten years, so the Republicans’ plan would have only a limited positive impact on the economy.
And, third, if tax cuts and increased military and infrastructure spending push up deficits and the public debt, interest rates will have to rise. This would hinder interest-sensitive spending, such as on housing, and lead to a surge in the US dollar, which could destroy millions of jobs, hitting Trump’s key constituency – white working-class voters – the hardest.
Moreover, if Republicans blow up the debt, markets’ response could crash the US economy.
Owing to this risk, Republicans will have to finance any tax cuts with new revenues, rather than with debt. As a result, their roaring tax-reform lion will most likely be reduced to a squeaking mouse.
Even cutting the corporate tax rate from 35% to 30% would be difficult. Republicans would have to broaden the tax base by forcing entire sectors – such as pharmaceuticals and technology – that currently pay little in taxes to start paying more. And to get the corporate-tax rate below 30%, Republicans would have to impose a large minimum tax on these firms’ foreign profits. This would mark a departure from the current system, in which trillions of dollars in foreign profits remain untaxed unless they are repatriated.
During the presidential campaign, Trump proposed a one-time 10% repatriation-tax “holiday” to encourage American companies to bring their foreign profits back to the United States. But this would deliver only $150-200 billion in new revenues – less than 10% of the $2 trillion fiscal shortfall implied by the Republicans’ plan. In any case, revenues from a repatriation tax should be used to finance infrastructure spending or the creation of an infrastructure bank.
Some congressional Republicans who already know that the BAT is a non-starter are now proposing that the corporate income tax be replaced with a value-added tax that is legal under WTO rules. But this option isn’t likely to go anywhere, either. Republicans themselves have always strongly opposed a VAT, and there is even an anti-VAT Republican caucus in Congress.
The traditional Republican view holds that such an “efficient” tax would be too easy to increase over time, making it harder to “starve the beast” of “wasteful” government spending.
Republicans point to Europe and other parts of the world where a VAT rate started low and gradually increased to double-digit levels, exceeding 20% in many countries.
Democrats, too, have historically opposed a VAT, because it is a highly regressive form of taxation. And while it could be made less regressive by excluding or discounting food and other basic goods, that would only make it less appealing to Republicans. Given this bipartisan opposition, the VAT – like the BAT – is already dead in the water.
It will be even harder to reform personal income taxes. Initial proposals by Trump and the Republican leadership would have cost $5-9 trillion over the next decade, and 75% of the benefits would have gone to the top 1% – a politically suicidal idea. Now, after abandoning their initial plan, Republicans claim they want a revenue-neutral tax cut that includes no reductions for the top 1% of earners.
But that, too, looks like mission impossible. Implementing revenue-neutral tax cuts for almost all income brackets means that Republicans would have to phase out many exemptions and broaden the tax base in ways that are politically untenable. For example, if Republicans eliminated the mortgage-interest deduction for homeowners, the US housing market would crash.
Ultimately, the only sensible way to provide tax relief to middle- and lower-income workers is to raise taxes on the rich. This is a socially progressive populist idea that a pseudo-populist plutocrat like Trump will never accept. So, it looks like Republicans will continue to delude themselves that supply-side, trickle-down tax policies work, in spite of the overwhelming weight of evidence to the contrary.

The Insecurity of Inequality

Kaushik Basu

Poor neighborhood Jakarta

NEW YORK – Global inequality today is at a level last seen in the late nineteenth century – and it is continuing to rise. With it has come a surging sense of disenfranchisement that has fueled alienation and anger, and even bred nationalism and xenophobia. As people struggle to hold on to their shrinking share of the pie, their anxiety has created a political opening for opportunistic populists, shaking the world order in the process.
The gap between rich and poor nowadays is mind-boggling. Oxfam has observed that the world’s eight richest people now own as much wealth as the poorest 3.6 billion. As US Senator Bernie Sanders recently pointed out, the Walton family, which owns Walmart, now owns more wealth than the bottom 42% of the US population.
I can offer my own jarring comparison. Using Credit Suisse’s wealth database, I found that the total wealth of the world’s three richest people exceeds that of all the people in three countries – Angola, Burkina Faso, and the Democratic Republic of Congo – which together have a population of 122 million.
To be sure, great progress on reducing extreme poverty – defined as consumption of less than $1.90 per day – has been achieved in recent decades. In 1981, 42% of the world’s population lived in extreme poverty. By 2013 – the last year for which we have comprehensive data – that share had dropped to below 11%. Piecemeal evidence suggests that extreme poverty now stands just above 9%.
That is certainly something to celebrate. But our work is far from finished. And, contrary to popular belief, that work must not be confined to the developing world.
As Angus Deaton recently pointed out, extreme poverty remains a serious problem in rich countries, too. “Several million Americans – black, white, and Hispanic – now live in households with per capita income of less than $2 per day,” he points out. Given the much higher cost of living (including shelter), he notes, such an income can pose an even greater challenge in a country like the US than it does in, say, India.
This constraint is apparent in New York City, where the number of known homeless people has risen from 31,000 in 2002 to 63,000 today. (The true figure, including those who have never used shelters, is about 5% higher.) This trend has coincided with a steep rise in the price of housing: over the last decade, rents have been rising more than three times as fast as wages.
Ironically, the wealthy pay less, per unit, for many goods and services. A stark example is flying. Thanks to frequent flier programs, wealthy travelers pay less for each mile they fly.
While this makes sense for airlines, which want to foster loyalty among frequent fliers, it represents yet another way in which wealth is rewarded in the marketplace.
This phenomenon is also apparent in poor economies. A study of Indian villages showed that the poor face systematic price discrimination, exacerbating inequality. In fact, correcting for differences in prices paid by the rich and the poor improves the Gini coefficient (a common measure of inequality) by 12-23%.
The better off also get a whole host of goods for free. To name one seemingly trivial example, I can’t remember when I last bought a pen. They often simply appear on my desk, unintentionally left behind by people who stopped by my office. They vanish just as often, as people inadvertently pick them up. The late Khushwant Singh, a renowned Indian journalist, once said that he attended conferences only to stock up on pens and paper.
A non-trivial example is taxation. Rather than paying the most in taxes, the wealthiest people are often able to take advantage of loopholes and deductions that are not available to those earning less. Without having to break any rules, the wealthy receive what amount to subsidies, which would have a far larger positive impact if they were allocated to the poorest people.
Beyond these concrete inequities, there are less obvious – but equally damaging – imbalances. In any situation where, legally, one’s rights are not enforced or even specified, the outcome will probably depend on custom, which is heavily skewed in favor of the rich. Wealthy citizens can not only vote; they can influence elections through donations and other means. In this sense, excessive wealth inequality can undermine democracy.
Of course, in any well-run economy, a certain amount of inequality is inevitable and even needed, to create incentives and power the economy. But, nowadays, disparities of income and wealth have become so extreme and entrenched that they cross generations, with family wealth and inheritance having a far greater impact on one’s economic prospects than talent and hard work. And it works both ways: just as children from wealthy families are significantly more likely to be wealthy in adulthood, children of, say, former child laborers are more likely to work during their childhood.
None of this is any individual’s fault. Many wealthy citizens have contributed to society and played by the rules. The problem is that the rules are often skewed in their favor. In other words, income inequality stems from systemic flaws.
In our globalized world, inequality cannot be left to markets and local communities to solve any more than climate change can. As the consequences of rising domestic inequality feed through to geopolitics, eroding stability, the need to devise new rules, re-distribution systems, and even global agreements is no longer a matter of morals; increasingly, it is a matter of survival.

Nothing to Fear but the Lack of Fear in Markets

Investors have taken recent geopolitical events in stride, but that won’t last forever

By Steven Russolillo

Very little seems to spook financial markets these days. That itself is a cause for concern.

Last week alone, a subway blast in Russia killed several people, a truck drove into pedestrians in Stockholm and the U.S. military launched dozens of missiles at a Syrian air base. Those three events normally would at least send some tremors through markets. Instead, stocks barely budged.

Traders for years have been conditioned not to overreact to geopolitical events. Dips following incidents such as the invasion of Crimea in 2014, the Paris terror attacks in 2015 and the Turkish coup attempt last year quickly turned into buying opportunities. The S&P 500 was higher after all three of them within five trading sessions.

But the latest reaction, or lack thereof, was even more pronounced last week. S&P 500 futures fell 16 points late Thursday night immediately after news broke of the U.S. missile attack. A few minutes after trading opened Friday morning, though, stocks were higher.

“Investors have developed a complacency toward these kinds of events,” said Andrew Brenner, head of international fixed income for National Alliance Capital Markets. “When you see these movements, there just isn’t any follow-through.”

Much of that has to do with the current stage of the market cycle. Sam Stovall, chief investment strategist at CFRA Research, found investors are much more likely to shrug off these types of events in good times rather than bad.

In bull markets since World War II, 13 of these so-called market shocks have prompted the S&P 500 to drop about 5% on average, taking nine days to bottom, according to Mr. Stovall. By comparison, when other exogenous shocks have happened during bear markets, the S&P 500 has dropped 17% on average, with these pullbacks lasting about two months before bottoming.

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This isn’t to say that the recent calm will last forever. Students of market history know that periods of low volatility last until they don’t. And markets have been eerily quiet of late, with volatility at historically low levels. The CBOE ’s Volatility Index, the VIX, averaged 11.7 in the first quarter, the lowest start to a year in its history.

How Syria plays out and what role it has on financial markets is obviously unknown at this point. But when geopolitical turmoil arises, “investors shoot first and ask questions later,” Mr. Stovall said. “And the question they often ask is ‘Will this lead to recession?’ If not, that’s more reason to buy the dip.”

In the ninth year of a bull market, there isn’t much that fazes investors, geopolitics included. But it only takes one whopper of an exogenous shock to change that.

This time certainly won’t be different.