From Russia with Love

The news from the East, in recent weeks, has not been conducive to steadiness in world stock-markets. There is nothing like political upheaval to give investors the jitters – especially when those jitters involve a nation the size of Russia – and markets dropped by a few percent almost as soon as the news broke. Whilst I would be the first to admit that I do not know the finer details of the issues that currently haunt Crimea, I do know that when a country with a history of favouring the fist and the jack-boot over the art of negotiation, feels that there are sufficient grounds for sending troops into another country’s territory, then there will be every chance of Western world leaders raising an eyebrow, and cocking an ear.

Once such leaders start to take an interest in the goings-on, then it is no time at all until stock-markets get rather nervous. It is fair to say that the situation regarding Russia and the Ukraine has not had as dramatic effect on markets as such matters as the credit-crunch and the subsequent financial meltdown of the banking system. Nonetheless, there has only been a rattling of sabres so far, and should there be any escalation of this rattling, then markets could be troubled somewhat more than they have been so far. There is always the fear, amongst market makers, given the agreement between some of the major Western nations that they would protect the sovereignty of the Ukraine, that this would raise the possibility of an ‘East versus West’ conflict. It is fair to say that it is invariably only the ghost of a chance that haunts the markets, and that the worst things tend not to actually happen. Be that as it may, the spectre of such issues is all it can take, sometimes, to set markets into a downward spiral.

It is my feeling, for what it is worth, that as none of the of the nations involved are in the mood for fisticuffs of any nature, and the consequences of a real conflict would be too painful to consider. The ethnic Russians in Crimea do need to be protected, and the national security and independence of the Ukraine should also be maintained, so given the potential consequences of a serious escalation, I feel that all the concerned parties will probably manage to work out an amicable solution.

“Not very financial” I hear you say, “More political” and I agree. However, markets are often as moved by political and other non-financial matters as they are by economics. What they want is stability, growth, and a nice spell of “steady as she goes”. We have enjoyed a couple of years, or so, of market growth, and as this continues, there is a greater possibility of markets being flustered by events – monetary or not. Many believe that there will be a continued spell of steady economic and stock-market growth, but others think that we are overdue for a sizeable market correction. Either way, remember: time in the markets, not timing the markets, is a sure way of making the best of your investments, and if you have a few shillings to spare, buy on the dips.

That’s all for now, folks, have a Happy Easter, and I’ll be back in the next issue to give you my Budget round-up.

David Foot

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