Markets and Geopolitics intersect in the Great Game being played in Ukraine. The West’s economies are diverging as a result of inflation shocks and looming recession. Divergence will play into Russian’s hands, and presents a clear market strategy: Buy Dollars and Sell Europe.
May markets are finishing on a dead-cat bounce - things could get more unstable through June. The outcomes in Ukraine are looking less favourable, and Europe will struggle with sanctions. The weakest link is unsurprisingly Italy. A bigger crisis in terms of famine will shortly become apparent in North Africa.
Ultimately the economic history books will record Russia’s invasion of Ukraine as a speedbump, and perhaps a triumph for a United Europe. The consequences of an Economic War with China could be much, much more significant!
The Ukraine War has catalysed a tsunami of negative economic events around the global economy – and markets are remaining pretty much blind to the long-term consequences.
The West will win the economic war against Russia, but it will take time and impose recessionary costs, while triggering pain across markets (including the housing bubble). But when it’s done… it will time to put your buying boots on!
Who really knows what is happening in Ukraine, or what the players are thinking? The long-term economic consequences could be huge, marking the moment the post Cold-War global consensus and order breaks down. The potential consequences include social and political instability, war, famine, and who knows what else.
Markets are nervous and set to tumble – spooked by $140 oil, soaring commodities, rising populism on inflation, and stagflationary risks. Some ask: “perhaps this could all be avoided by settling with Putin?” Forget the past at your peril. Appeasement is not the answer. Intimidation stops when you fight back. Now is the time for the west to step up the pressure.
Some investment banks are picking up cheap Russian assets – which negates the purpose and aims of sanctions, and will simply fuel Putin’s propaganda machine. Meanwhile, Blain’s stupidity index is only down 38% - which shows there are still greater fools out there…
Trying to strip out noise from facts has never been so complex! It’s time to resort to the rarest of all commodities; Common Sense - to work out how this will likely play out. There will be clear winners – and one massive loser – and significant economic pain before we get there.
Russia thought it would roll over Ukraine, but the West’s Financial Blitzkrieg now threatens to trigger the unravelling of Putin’s autocracy. Excellent! The West needs Russia and Russia needs the West. It’s Putin’s kleptocracy we could all do without…