A day after reminding everyone that Sochi was in the rear-view mirror and that the real Vladimir Putin was back, the modern day ‘czar’ of Russia eased off his hard stance today, claiming he doesn’t want to use force in Ukraine but reserving the right to do so. Russia maintains it’s forces in Crimea, but is sending troops at the border back their bases after ending a “military exercise.”
Although Putin doesn’t really have much to fear in terms of retribution for making mistakes within his own country, the markets were giving him a different story, as Russia’s MICEX (MICEXINDEXCF.ME) index tumbled a whopping 10.8% yesterday. Recovery in markets abroad, and here in the states (^GSPC, ^DJI), have essentially brought us back to the status quo, something which Zachary Karabell of Envestnet felt was the most likely scenario.
“If you believe in the dominos endlessly falling, you can spin out a thesis of this [leading to further Ukraine trouble],” he says in the attached clip, but warns we can’t look too far into problems affecting a small area of the world. “The reality is Crimea is a two and half million person peninsula in the middle of what used to the Soviet Union. It’s implication for Amazon’s (AMZN) sales, or whether Apple’s (AAPL) going to sell more iPhones in Changsha, that’s where you really have to go and ask whether this changes any fundamental trends in the world today.”
U.S. Secretary of State John Kerry flew into Kiev today to show support for the struggling Ukraine government, pledging financial assistance in the form of $1 billion in energy subsidies. While very helpful to the fledgling government, Ukraine’s weakness doesn’t necessarily spell doom for U.S. markets, and Western European markets closer to the action. “You would require a much more significant global crisis before you’re talking about American consumers hoarding food in their basements,” Karabell wryly notes.
If you’re looking for a reason to trade stocks based on geopolitical instability, Karabell says that’s not his game. “Look, markets may sell off for their own intrinsic reasons, we were up 30% last year, there’s going to be a lot of consolidation; basically in 2 months we’ve been flat, and that could’ve been happening without Crimea, and it can be happening because of it,” he says, noting that despite all the saber-rattling and transatlantic bluster, “we are in a churning market regardless.”
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