On February 2nd (Framework for Ukraine) we didn’t know what Putin would do in the case of invading Ukraine. Unfortunately, February 23rd we got the answer. NATO Secretary General Jens Stoltenberg condemned Russia’s invasion of Ukraine, saying it constituted “war in Europe of a scale and of a type that we thought belonged to history.” Unfortunately, Putin has made this part of our history now. It has been terrible to see what has unfolded in Ukraine, yet the robust united response from the global community has been an inspiring demonstration of intolerance, including a historic move by neutral Switzerland.
At this point, it’s likely that more sanctions will be levied on Russia, and those already in place are putting pressure on Putin’s wealthy enablers and the Russian economy as a whole. The Ruble is worth 30% less than it was a week ago, with inflation soaring, and the Russian stock market remains closed. The sanctions will have a lasting impact in Russia and may impact their core trade partners, dependent on their oil and other commodities, in the short term, more than the United States. As shared in our last message, we still believe that Putin’s aggression will remain local to Ukraine. Further geographical aggression is even less likely given the bold response from the global community.
In the longer term, we still believe the potential for the most significant risk would evolve from unchecked aggression. There are always short-term political risks, but mismanagement of conflict could have the effect of casting the United States as a declining global force and an unreliable partner. This scenario opens the door for China to position itself as a replacement in the global arena, which is a broader risk worthy of future updates. (In the coming months we will provide separate blogs on the US dollar as the world currency, and the global digitization trend*.) Sanctions, NATO remaining united and activating its response force, halting NORD Stream 2, and positioning Russia as a global pariah are all steps that check this aggression short of a war. These are assessed as strong stabilizing actions for global markets.
We are eager to see a swift resolution to the Ukrainian invasion; one which leaves a mark on Russia to remind future potential aggressors of their own potential for collateral damage. Until then, the world will continue to turn with countries and communities trading and seeking progress. This is a real-time example of the opportunity cost of missing the strong performing days in the market, which typically occur after some of the worst. Since the invasion, major indices are all in positive territory as we write (March 2nd), with the S&P 500 up +3.7%, and Russell 2000 leading the way at +5.4%. The majority of gains occurred in immediate days after invasion. Stay the course and remain disciplined. Your family’s personal headlines drive the priority!
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