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Today's big stories

Investors didn't react well when Russia took its first steps into Ukraine
One investment manager has laid out how each possible outcome of this Ukraine crisis could impact your investments – Read Now
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Czarstruck

What’s Going On Here?

Another act of Russian aggression sent ripples through markets on Tuesday, but you know what they say: even Vlad publicity is good publicity.

What Does This Mean?

The West has been concerned that Russia might invade Ukraine for a few weeks now, and Russia’s decision on Monday to recognize the independence of two separatist Ukrainian regions – and to subsequently install troops in both of them – won’t have done much to help matters. Investors certainly didn’t like it one bit: global stock markets fell at the prospect of all-out war, and the prices of gold and government bonds soared as everyone rushed to buy safe-haven assets. The price of oil shot up by 5%, as the prospect of a disruption to supplies of the slippery elixir took hold. And with Russian sanctions looking more and more likely, the Russian ruble rounded things off by collapsing to a 15-month low.

Why Should I Care?

For markets: Inflation up, growth down.
Just the news that Russia – the world’s third-biggest oil producer – might be edging closer to an invasion sent the price of oil up to nearly $100 a barrel. That alone could put more pressure on the global economy, but JPMorgan has war-gamed a scenario where we hit $150 a barrel this quarter. If that happens, the investment bank’s forecast for global inflation in the first half of the year would double to 7.2%, and global economic growth would shrink from 4.1% to 0.9%.

The bigger picture: A lose-lose for central banks.
That combination of higher inflation and slowing growth would put central banks in a Catch-22. One of the best weapons in their arsenal to limit inflation is to raise interest rates even quicker than they’d planned, which would slow down borrowing and spending. But they’d also be aware that those same interest rate hikes would, by definition, only make the economic slowdown worse.

You might also like: Six ways to adapt to rising interest rates.

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Analyst Take

An Investor’s Guide To The Russia-Ukraine Crisis

Carl Hazeley, Analyst

What’s Going On Here?

The Russia-Ukraine crisis is on a knife’s edge, that much is clear.

And while where we go from here is up in the air right now, economists from investment manager abrdn have considered various outcomes.

We could be looking at a diplomatic fix, for example. But that’s not a clear-cut “shake hands and let’s be friends” situation, as any sign of weakness could precipitate more negotiations.

We could be looking at some combination of fragile diplomacy and Russian “grey-zone activity” – a.k.a. cyber warfare – that rumbles on for a while yet.

Or there could be something much, much worse.

So that’s today’s Insight: six scenarios for how the crisis might pan out, and how the crossfire from each of them could damage your portfolio.

Read or listen to the Insight here

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