3/3/2014 Russian President Vladimir Putin sent Russian troops to the Crimea Peninsula in Ukraine. As investors saw a regional takeover in the making stocks plummeted. It was the biggest drop we’ve seen this year as fears that tension between the two countries would continue to grow leading to sanctions.
Also yesterday, President Obama announced that if Putin continued on the path he was on, there would be repercussions to face. Those repercussions most likely involve sanctions against the Russian economy that could lead to financial worldwide financial woes.
3/4/2014 Russian President Vladimir Putin announced that he’s not interested in using military force to take over the region. However, he insisted that Moscow has the right to protect Russian speakers abroad using whatever force necessary, including military force.
Europe seemed to be happy with the statements as they pressed for diplomacy. However, we shouldn’t be too shocked by that considering the economic ties that Europe has to Russia, but we’ll get into that later.
President Obama and Secretary of State Kerry weren’t so happy however. They criticized Putin’s announcement and stated that they are still pushing for sanctions that would put a lock on Russian assets and trade.
However, investors seemed to be happy with what Putin had to say today as well because we saw the stock markets jump to incredible numbers. The S&P 500 broke an all-time record, and Nasdaq soared almost 1.8% while the Dow jumped more than 200 points for a 1.4% increase. Consumers seem to be bailing out of safe haven investments like Gold, which saw a 1% decrease in price today. While they do so, investors are putting more trust in US Treasury Bonds where a 10-year yield increased to 2.69%
How Realistic Is It to Expect Sanctions
Investors don’t seem to be expecting sanctions, and although I can’t tell the future, I don’t think it’s going to happen either. The truth is, Europe has strong economic ties to Russia. I’m talking about hundreds of billions of dollars in imports and exports worth of economic ties with Russia! Europe also has economic and political relationships with the United States, and for sanctions to happen, Europe and other countries would have to be on board.
Unless we see the issue escalate further in Ukraine, I don’t see Europe and other nations within the UN approving sanctions. I say that because of the financial devastation it could have on Europe and the rest of the world economy.
I’m definitely on edge with this going on. First, we see markets plummet, the next day, we see incredible increases. However, we can never be sure what’s going to happen next when it comes to finance and politics. Nonetheless, it’s definitely going to be interesting to watch the situation unfold.