Reports have emerged over the weekend that Russia will invade Ukraine as soon. These reports have, without a doubt, caused the world to go into panic mode and stirred a new sense of turbulence in the financial markets. The question on everyone’s mind is what do we stand to do to protect our financial position? The short answer… DO NOTHING! – but let’s elaborate and back that up.
When it comes to the latest Ukraine-Russia tensions, only Vladimir Putin can predict the Kremlin’s next move with a degree of certainty. In fact, the world is still scrambling to uncover Putin’s motives for this colossal military build-up. While the western world is cycling through every combination of threats to deter the Russians from attacking, it seems like their ability to affect the Kremlin’s immediate actions are limited.
There is no doubt that a Russian invasion of Ukraine will spook global financial markets and oil prices. This is evident in how the global stock markets tumbled deep into the red on Monday as oil prices rocketed amid concerns about a possible Russian invasion.
This is not the first time Russia is stirring panic in the markets. In 2014, Russia’s invasion and annexation of Ukraine’s Crimea sent shockwaves through global markets, but as always, with geopolitical flare-ups, the volatility was quickly subdued. That's not to suggest that the threat of 2014 was in any way similar to what we are currently seeing, with over 130,000 Russian troops staged just outside the border of Ukraine. However, the reality is that the accompanying market turbulence in the capital markets is nothing new.
The following chart visually illustrates the past ten decades of bull and bear markets, a time filled with wars, financial crises, terrorist attacks and a global health pandemic, all of which caused significant market disruptions that led to economic bear markets. It is impossible to predict the next bear market or its severity with precision. Still, one can be confident that after every bear market, there will be a bull market where the capital markets around the world will resume their permanent advance.