Bragging rights for the hottest stock market in the world this year belong to an unlikely leader: President Vladimir V. Putin from Russia.
The combination of rising Russian stock prices and a buoyant ruble in 2019 has led to some of the best investment returns in the world. Expressed in US dollars, Russian equities have risen more than 28 percent (and more if you include dividends). By contrast, the S & P 500 gained more than 16 percent.
There are fundamental economic reasons for the rally in Russia, especially the rebounding price of crude oil, a cornerstone of the country's economy.
"This has been driven by perceptions of political risk," said Jason Bush, senior analyst at Eurasia Group, a consulting firm. "Last year, concerns about new US sanctions on Russia were huge."
Last year, after the US imposed sanctions on prominent Russian businessmen, officials and companies – a reaction to Russia's interference in the 2016 presidential election among others – investors fled.
The country's stock market fell more than 15 percent in US dollars. On the bond market, prices also fell, making it more expensive for people and companies to borrow money. As the capital withdrew, the ruble fell by about 20 percent.
While relations between Russia and the West deteriorated for months over the past year, investors were bracing for more bad news. "It's a non-investable country, as investors saw it last year," said Lale Akoner, Global Market Strategist at BNY Mellon Investment Management.
But it's thawed. In January, the Ministry of Finance lifted sanctions against a number of Russian companies. The Ministry of Foreign Affairs did not impose an expected second round of sanctions in connection with the poisoning of a former Russian intelligence agent in Britain in March 2018. And the legislation of the Congress on the Punishment of Russia has stalled.
"These big sanctions in the financial sector that people were worried about were never implemented," said Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics.
This has prompted investors to focus on fundamentals: a Russian market on which stocks traded off after selling off last year, especially given the rise in global oil prices by more than 45 percent earlier this year, as dirt cheap were. This rally helped shore up the value of the ruble and halted the slide in Russia's stock markets, most of which are energy companies.
"If oil develops well, Russia will perform well," said David Hauner, a market strategist at Bank of America Merrill Lynch.
On a broad front, analysts are increasing their expectations of the profits of Russian companies this year, and some of these companies are pouring out rich dividends to shareholders. (The dividend yield of the MSCI Russia Index is three times that of the S & P 500.) Russia's relative isolation from the US-China trade war is another selling point.
But buyers beware: Although it has its good years, the Russian stock market is known for volatility. To earn money, impeccable timing is required.
While the Russian economy is tied to the export of raw materials, the country's foreign policy has for many years been at odds with its main trading partners in the European Union. In the long term, the post-Soviet Russian government has repeatedly turned to weakening the ruble in order to weather economic shocks that impact US dollar-denominated investment.
The RTS index, which measures Russian equities in US dollars, for example, is still around 45 percent below its 2008 high.
And the Russian economy is showing signs of slowing down in the first quarter of 2019 Growth of only 0.5 percent in the previous year.
"One thing about Russia is that there are always surprises," Bush told the Eurasia Group. "And they are almost always negative."
Andrew E. Kramer contributed to the coverage.