To The Moon

Build-up of geopolitical tensions between Russia and Ukraine which many worry could spark a military conflict has come to fruition. In the prevailing macroenvironment, we believe that the unexpected event has brought about some questions from our investors and hence in this write up, we will be providing our reader with a better understanding to the situation.

Image from Google

What has happened?

• The North Atlantic Treaty Alliance (NATO) has been expanding east after the Cold War ended – NATO took in countries that was once part of the Soviet Union.
• The move was viewed as a threatening encroachment towards Russia’s border that could place the nation at risk of attacks。
• Russia has also claimed that the inclusion of past soviet nations was a betrayal of western promises in the 1990s.

That said, what really sparked tensions between Russia and Ukraine was the Ukrainian governments’ ambition to align itself more with western countries – Ukraine has publicly stated interest in joining NATO. Since then, Russia has expressed strong disapproval and demanded legal assurances that Ukraine would never be admitted to NATO but those demands were refused which led to Russia’s latest actions.

What are the implications for the market?

Markets have already been roiled this year by hawkish signals from the Feds and the European Central Bank (ECB). With the escalation initiated by Russia, we saw prices of energy and other commodities soar (Russia is a prominent exporter) which brings about more concern amongst market participants as uncertainties looms.

On a macro level, we believe that world economies may take a hit if prices remains elevated for a prolonged period as companies and consumer find their bills rising and spending power squeeze. Combine this with the fact that growth in most economies are moderating, a stagflation outcomes appears imminent – rising prices and slower economic growth. That said, we believe that the rally in commodity, more specifically energy, will cool as US and its allies would not impose sanctions on Russia that would result in a price shock.

Delving deeper, the outlook for financial markets remains precarious and we believe that many will look to the central bank’s policy for direction – with interest rates at rock bottom and asset purchases maxed out, central banks have little room for manoeuvre which leads to the question of will there be a change in policy.

Overall, we expect sentiments to be skittish and volatility will continue to be the hallmark of global markets this year as market participants come to grips with a barrage of developments. Regardless, we believe that the long term case for investing remains intact and having additional liquidity will come in handy.

After all, time in the market is better than timing the market.

Should you wish to diversify your portfolio, you may access our full suite of funds through the Discover Tab, and selecting Fund Mall in Tiger Brokers(SG) on the top tab choices.