A simplified explainer on the Russia-Ukraine story is well overdue on our part, so let’s check out what it’s all about & how markets are affected.
Keep this in mind while you read
Russian president Vladimir Putin genuinely believes the two countries are one nation.
Without getting into the nitty-gritty
Ukraine gained independence from Russia back in 1991.
In 2014, Russia formally took possession of Crimea, a Ukrainian peninsula, followed by fighting between Ukrainians & Russians, resulting in more than 14,000 casualties.
Although a peace agreement was brokered in 2015, both countries have since been claiming violations of the treaty, with claims significantly increasing the past few months.
Now, tens of thousands of Russian troops, or as Putin calls them, “Peace Keepers”, have surrounded Ukraine, ready to strike.
And strike they did, according to bloomberg.
Western sanctions on Russia
Economic sanctions imposed on Russia by western countries such as the US, Germany, & the UK are being criticized for being too light, & not directed at Putin himself.
How different markets are faring?
Oil prices are soaring, as Russia is considered the largest supplier of oil & natural gas to European countries.
The S&P 500 officially entered correction territory (a 10% decline from a recent peak) on Tuesday. It’s now down almost 12% year-to-date (YtD).
Bitcoin has been falling sharply, too, & is down almost 26% YtD.
What comes next?
Historically speaking, financial markets tend to recover quickly from geopolitical events. They also tend to see geopolitical events as opportunities (think: 9/11 or the Arab Spring).
General consensus between analysts is that in case matters don’t escalate to a full blown war, markets won’t experience much other than volatility. War, on the other hand, is a completely different story.
Investors have several options in times of geopolitical uncertainty, but one concept remains at the core: diversification. Some investors might choose to hold less volatile instruments such as bonds or gold. Others might choose to hold cash to capture potential opportunities.