Of course, not all stocks have been falling. The rise of oil and gas prices have bolstered the S&P500βs energy sector, the best performer this year, with a return of 21.8% through Monday.
Overall, we can see that it has boosted the commodity prices, stimulated the market risk aversion, benefited some assets such as bonds, gold, the Japanese Yen, the US dollars etc. It is also increased the risk of global stagflation and delayed the economy from recovering. Many investors may choose to wait and see after experiencing a period of volatility due to the uncertain duration of geopolitical conflict.
Overall, the stock market has been afflicted by multiple troubles such as fears of rising interest rates, sizzling inflation and continuing supply-chain bottlenecks.
πLong-term investors with well-diversified portfolios of stocks and high-quality bonds will probably be able to ride out this crisis, as they have so many others.
What are the impacts of this Russia-Ukraine crisisβοΈπ₯
1) Commodity prices such as oil, natural gas, grains, metals, fertilizers and gases benefited from this crisis
This is because the Russia-Ukraine region is an important export destination for global commodities such as oil, natural gas, grains, metals, fertilizers and gases. Due to this Russia-Ukraine conflict as well as the US and European sanctions against Russia will significantly reduce the Russian commodity exports, thereby pushing up related commodity prices.
The price of oil is already steep, approaching $100 per barrel. It is likely to soar higher, especially if Russia mounts a full-scale invasion. The surges of oil prices are already painful for the consumers. According to the AAA Gas Prices website, the cost of gasoline already averages $3.54 per gallon and the inflation is about 7.5%, a 40 year high in the United States.
While Malaysia CPO price rises to RM7,000 a tonne for the first time as Russia invades Ukraine.
2. Favour safe-haven assets such as bonds, gold, the Japanese yen, and the US dollar, and combat risky assets such as stocks and emerging market currencies
The conflict between Russia and Ukraine has boosted risk-aversion in global markets and caused the security in Europe to deteriorate sharply. While the stocks often fall amid the global turmoil, US Treasury bonds tend to rally as investors seek havens and drive up their share prices. Bond prices and yields move in opposite directions and because interest rates are rising, the treasuries have declined in value.
So, we can see that the prices of safe-haven assets such as bonds, gold, Japanese Yen, the US dollar have risen, while the stocks and emerging market currencies will fall.
3. Increase the risk of global stagflation and delay the process of economic recovering
The Russia-Ukraine conflict and the US and European sanctions against Russia will increase the risk of global stagflation. It will increase inflationary pressures by pushing up commodity prices and affects real demand by cracking down on risky assets and private sector confidence. In this case, it will ultimately delay the economic recovery process. The Russia-Ukraine conflict has had the greatest impact on Russia and Ukraine’s own economy, followed by the European economy, and it has also had a negative impact on the economies of the Asia-Pacific Region and the United States.
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