April 22, 2022
Retail investors who got their start during the pandemic have recently been waking up to a fairly stark reality in markets – most namely, that “stocks don’t always go up” (at least, in a straight line.)
Two critical factors are behind the headwinds – inflation, which we covered in last week’s newsletter (don’t worry, we posted the jist on our blog), and geopolitical tension. That’s a pretty long phrase, so let’s dive in:
In short, investors are concerned about the possibility of a conflict in Ukraine, a country in Eastern Europe. Eight years ago, Russia invaded and annexed the Crimea Peninsula from Ukraine. They did this with little accountability from the West, perhaps most notably because Russia absorbing the territory was seen as popular among a portion of Crimean residents.
That annexation started an eight year conflict, which continues to this day. However, satellite imagery and political drama indicates that Russia might be coming back for seconds – for all of Ukraine.
Russia insists that the claims about its speculated invasion are just “propaganda” from Western countries, specifically the United States. However, it’s important to remember that everything is propaganda. The West claims that satellite imagery – which shows camps, artillery, and large barracks for troops near the border – discredit Russian President Vladimir Putin’s call for peace talks and resolution.
Regardless of political bickering, if Russia does decide to invade Ukraine – it will affect the price of commodities such as oil and natural gas (especially in Europe.) It also stands to destabilize the European continent, which relies on Ukraine as a buffer. Ukraine’s valuable materials – such as neon, for which it produces 90% of all semiconductor grade neon – will also be at risk. These are some pretty meaningful reasons why Western countries such as the United States, Germany, the United Kingdom, and others will be weighing into the conflict.
Perhaps more importantly than all of that, China will be keeping a watchful eye on a prospective conflict in Ukraine to see what they might be able to get away with in Asia. It’s no secret that China has been accumulating a military presence in the South China Sea, and it has been exercising greater influence over Hong-Kong, which it might fully reclaim, along with other regions it has territorial claims over such as Taiwan.