The conflict between Russia and Ukraine is not easing. Instead, it is escalating. As a result, the stock markets, energy prices, and gold prices might be impacted. Read on to know more about the influence of the potential Ukraine-Russia war on the stock market.
The Threat
According to
reliable data, Russia might attack Ukraine any day now, and the Russian
military is prepared to start an invasion of Russian President Vladimir Putin
orders it. US President has warned Putin of severe costs if the war begins.
Bad Friday
Last Friday,
investors got a taste of what market shock to expect if the Russia-Ukraine war.
The US stocks extended a selloff and ended sharply lower. The Dow Jones
Industrial Average or DJIA reduced by 1.43%, and S&P 500 SPX reduced by
1.90%. Also, oil futures, 0.17%, increased to a seven-year high. There was a
round of buying interest in traditional safe-haven assets, and it pulled down
Treasury yields TMUBMUSD10Y, 1.925%. Interestingly, gold surged 0.84%, and the
US dollar rose by 0.25%.
The Call
US President Joe
Biden and Russian President Vladimir Putin spoke via telephone on Saturday to
try to de-escalate the crisis. However, there was no breakthrough. The White
House stated that Biden “was clear that, if Russia undertakes a further invasion
of Ukraine, the United States together with our allies and partners will
respond decisively and impose swift and severe costs on Russia.”
What the
Investors Should Know?
Ø Energy Prices Will Rise
Energy prices
are expected to reach $100 a barrel for the first time since 2014. As Russia is
also a key supplier of natural gas, those prices could also increase across the
world.
Ø Impact on Treasury
Investors
consider Treasury as a haven when there is geopolitical uncertainty. However,
treasury yields slid on Friday. They were vulnerable to pullback after surging
on Thursday after a hotter-than-expected January inflation.
Ø More Volatility for Stocks
The uncertainty
regarding the Russia-Ukraine war will probably lead to more stock volatility in
the near future. Experts also highlighted that US equities usually get over
geopolitical shocks quite fast.
Ø Panic Sells Should be Avoided
Many experts who
have analyzed past geopolitical crises and are studying this one too are
advising people not to sell into a panic. The crisis is usually over within six
months and even less than that. For instance, after the 9/11 tragedy, Dow fell
17.5% to reach a new low, but the market recovered quickly to trade above the
September 10 level in just six weeks, on October 26.
Ø Gold Performance
If the
Russia-Ukraine war happens, it will positively impact the performance of gold
as most investors consider it a safe haven commodity.
Ø Bitcoin Performance
Bitcoin (XBT),
which is referred to by some crypto bulls as digital gold, fell and might fall
further if the war happens.
Ø Defense Stocks Might Rise
Defense stocks
like L3Harris (LHX), Northrop Grumman (NOC), and Lockheed Martin (LMT) might
also perform better in case of war because, in such times, there will be
expectations of more demand for military spending.
To know about
Canadian stock market updates, click here.
Also, read about
differences in investing in the US vs. Canada over here.
Final Words
All in all, it
can be said that if Russia attacks Ukraine, it will be enough for global
markets to tumble. So, it would be best if you were more cautious as an
investor.
Sources:
https://www.marketwatch.com/story/what-a-russian-invasion-of-ukraine-would-mean-for-markets-as-white-house-warns-attack-could-come-any-day-now-11644624056
https://www.cnn.com/2022/02/11/investing/dow-stock-market-today-russia-ukraine/index.html
https://www.livemint.com/market/stock-market-news/stock-market-next-week-lic-ipo-drhp-to-russia-ukraine-conflict-top-5-triggers-11644657787714.html