Investors should rightly be concerned about the Russia-Ukraine crisis.
An invasion of Ukraine is imminent within weeks unless a diplomatic breakthrough occurs, according to a recent report from New York-based financial firm Academy Securities.
The problem is that none of the parties to the talks seem willing to back down, the Academy report states.
“Both sides are taking steps to escalate tensions to improve their negotiating positions (an incredibly slippery slope,)” the report states.
As if that wasn’t bad enough a U.S. aircraft carrier strike group is now under NATO (North Atlantic Treaty Organization) command, something which hasn’t happened for decades. That strike group will now join other NATO members in exercises.
Put another way, this is serious stuff. And investors should be prepared for volatility in stocks, bonds, and commodities.
It isn’t just the tension that’s mounting. It’s that the only way out seems to be through one man changing his mind on matters. That man is Putin
Washington and the White House have been trying to find a diplomatic solution while at the same time making threats of what will happen to Russia if Ukraine’s borders are breached, says General David Deptula, writing in the Academy report.
One problem, that Deptula doesn’t mention is that President Biden’s former boss Obama made threats against Syria at the beginning of the Arab Spring in 2011. He said there would be consequences if a red line was crossed by Syria’s leader Assad. The line got crossed and pretty much the U.S. did nothing.
And there’s the rub, because it was shortly after that flub, that Putin decided to annex Crimea from Ukraine in 2014, believing correctly, that he’d get away with it.
That brings us back to now. The same Putin is still in office facing the same old adversary, the U.S. and its allies. Despite all efforts by the west so far little progress has been made.
“But the reality is this: Putin created this crisis, and only Putin can end it,” Deptula says.
I wouldn’t be so bold as to guess whether Putin will or won’t decide to invade. However, I believe that an incursion by Russia into Ukraine will roil the financial markets across the globe.
Oil prices will likely jump higher along with wheat prices. Ukraine and Russia are key providers of those commodities. Stocks will likely plunge and U.S. Treasuries will rally as investors seek the security of a safe-haven asset.
