Russia is making the news lately, as it struggles with the potential loss of influence in the Ukraine. The turmoil dates back to November when then Ukraine’s president Viktor Yanukovych pulled out of a deal with Europe in order to forge closer ties with Russia. In December, Yanukovych met with Vladimir Putin, and Russia provided Ukraine a $20 billion bailout package. Protesters turned violent in January when the Ukrainian President signed legislation outlawing protests and clamping down on his opposition. Ukraine’s Prime Minister resigned after the parliament repealed the anti-protest legislation. Yanukovych fled the capital in February, and parliament voted to relieve him of his powers and set new presidential elections for May 25.
In March, thousands of heavily armed men, allegedly Russian, seized locations on the Crimean peninsula and effectively cut it off from the rest of Ukraine. President Putin said he’s trying to protect ethnic Russians in Ukraine. He said violence is not necessary but reserves the right to use it. The Moscow-backed government of Crimea set a referendum for March 16th to secede from Ukraine and join Russia. The United States and Europe have offered billions in loan guarantees and aid to Ukraine in ordered to entice them to move west.
One of the largest financial market impacts was the loss of 11% on Russian financial assets on Monday alone, leaving Russian oligarchs with a projected loss of $13 billion. We do not believe the Russians will go away quietly, as they have much to lose in the Ukraine. Russian leaders seem unwilling to leave previous Soviet Union territories to rule themselves. Beyond political influence, most of the pipelines used to deliver Russian natural gas to Europe lie beneath Ukrainian soil, providing more reasons for Russian aggression and meddling.
We do not believe the Ukrainian conflict is over. The country is in disarray from its own internal political conflict and civil unrest, not to mention an equally important financial crisis. This will weigh on the economic growth of the nation and region as well.
We are vigilantly monitoring the effect of actions in the Ukraine on U.S. domestic financial markets. It seems like just yesterday, we were attempting to forecast the financial, economic and geopolitical outcomes of 2014. Russia’s threat of military intervention into Ukrainian affairs didn’t make the list of possibilities.
This brings us to a point we frequently make: If you have spending needs within the next 10 years, you should avoid the volatility of equity markets. During yesterday’s decline, the bond market rallied as investors sought the safety of U.S. Treasury bonds. For those who have their spending needs covered for the next 10 years, we recommend you to stay the course, fully invested according to your financial plan.
At Henssler Financial we believe you should Live Ready, and that includes understanding your long-term investment strategy. If you have questions regarding your financial plan, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at email@example.com.