We hope you enjoy this commentary and with a quickly shifting geopolitical landscape, kindly note the time of the writing was prior to posting, with comments made based on events leading up to February 26, 2022.
By Mark Barry, CFA: Following weeks of speculation, on Wednesday evening (early Thursday morning in Moscow) Russian President Vladimir Putin announced that Russia would commence a “special military operation” against neighboring Ukraine. Minutes later, missile strikes hit targets across Ukraine and Russian ground forces began their assault, launching what has turned out to be a major multi-pronged invasion of the country and the most significant security crisis in Europe for decades. Global markets reacted immediately to this news as equities sold off, bonds rallied, gold and the US dollar were bid up, and oil prices spiked.
As of this writing, heavy fighting continues throughout the country and the situation remains very fluid. Determining the precise economic and market implications of this invasion is largely impossible at this time, as much depends on factors such as how the action on the ground unfolds moving forward, the sanctions regime implemented by Western countries, and any counter-responses from Russia. What we can say with conviction is that the conflict unfolding between Russia and the West over the events in Ukraine makes for a volatile geopolitical risk environment that has created significant additional uncertainty for the global financial markets.
Following the outbreak of fighting we have heard many investors express concern about the repercussions for markets, and understandably so. While further escalation in either kinetic or other types of conflict with Russia certainly poses significant risks, we wanted to provide an update with some perspective for long-term investors regarding the impact of geopolitical events on the US equity markets. We have also provided some brief commentary that highlights key considerations for investors in thinking about the potential economic and market implications of continued geopolitical tensions between Russia and the West.