Russia

A global macro strategy seems the place to be in the current extremely volatile stock market climate. But beware, if you do not combine global macro with micro factors, you are doomed to fail, says Christopher Govaerts (photo), chief strategist at Belgian private bank Nagelmackers. Specifically, British equities and emerging markets such as China and Brazil now offer a counterweight.

Russia ETFs or funds are dropping out of the market in droves. Some are still open, as market makers manage to keep them barely alive. But for how much longer?

Russian interests have found Luxembourg’s expertise useful as a European business hub for several decades. Here we look at the state of this relationship before the invasion of Ukraine, and how these arrangements might be affected by the subsequent sanctions and the decisions of business leaders and politicians in Luxembourg.

Also as international funds hub, Luxembourg finds itself exposed to the economic fallout from Russia’s war against Ukraine. Hundreds of investment funds with assets in Russia’s financial markets are making extra efforts to keep clients abreast about the financial impact of international sanctions. Dozens of funds have already been suspended and from Wednesday, European stock exchanges have banned all trade in Russian securities.

Switzerland, long a place for Russian oligarchs to park their money, announced Monday it would set aside its long-standing and deeply-rooted tradition of neutrality in order to freeze Russian financial assets in the country, as the fast-moving international reaction to Russia’s invasion of Ukraine continues. In so doing, it joined the European Union and a growing list of countries attempting to penalise Russia, as Luxembourg drew its financial sector’s attention to several EU sanctions measures.

Luxembourg fully supports the European Union’s additional sanctions against Russia over its aggressive move towards Ukraine but supports a cautious approach with the EU’s plans to eject Vladimir Putin’s country from the international payments system Swift. If that happens Russia will in essence be cut off from the world economy.

Western leaders are struggling with their response to Putin’s latest challenge. They agree that it should look like a unified position. In this respect, they are mainly writing down measures that the United States and Western Europe are prepared to take if Russia takes the next step. In this context the combination of French boasting and German passivity is not a happy one.

Global financial markets were in turmoil on Thursday in a clear sign that investors had not expected Russian President Vladimir Putin to make an aggressive move into Ukraine by launching a full-scale invasion.

“Even just yesterday people were dismissing this as unlikely,” well-known economist and Fed watcher Mohamed El-Erian, advisor at the Allianz & Gramercy said. “This is way beyond anything. This is a very unsatisfactory situation.” 

Conventional stock market wisdom says investors should buy when the cannons roar and sell when the stock market hears the clarion call. The cannons are literally roaring today. But does this reasoning hold true?

Author Ben Carlson has written extensively on the relationship between war and stock market performance. However, the relationship between geopolitical crises and market performance is not as obvious as you might think, he argues.

Global financial markets are on tenterhooks on Tuesday, 22-2-22, after Russian President Vladimir Putin late on Monday recognised the separatists in the east of the Ukraine’s and ordered his troops into Ukraine’s Donetsk and Luhansk regions. 

Putin’s aggression means investors now face fresh uncertainty as the ongoing geopolitical developments will have consequences for the economy, for monetary policy, for cohesion among European countries and for transatlantic relations.