How The Russia — Ukraine Conflict Impacts Stock Market Investors & Other Investments

The shocking events unfolding in Europe are sending shock waves throughout the world and our financial systems. We could be on the brink of economic crisis, which is why this post is so urgent.

So whenever a crisis breaks out, it’s usually the everyday people that get pushed around while the rich billionaires just sit in their ivory towers profiting from the chaos.

When you see these events happening on the news, it might feel quite far from home. However, that couldn’t be further from the truth. The situation between Russia and Ukraine has escalated very quickly.

So quickly in fact, that when I was planning this post, I was going to discuss the potential scenarios if Russia invaded and what it would mean for you, and your money, but it’s no longer a what if, because the war has already started.

If you wanna avoid being one of the financial casualties of this dire situation, then the information I’m going to be sharing in this post should prove very helpful when maneuvering your money.

To keep a long story short, Russia has invaded Ukraine, and set global governments into crisis mode. No matter what side you agree with, it’s clear that everyone will be impacted by economic sanctions, and in response, retaliations.

So let’s first look at how this crisis will have a direct impact on your wallet for increased living costs. As a businessman and investor, I understand that our supply change rely heavy on global collaboration, and one weak link can cause a whole chain reaction.

The governments around the world are being urge to make things financially difficult for Russia and hit them where it hurts, in their wallet because after, all money talks.

However, this is a game Russia can play too, and they have some pretty huge financial leverage points that they can exploit if they choose to retaliate.

I don’t know why I’m saying if, as Putin himself recently stated that anyone standing in his way would feel consequences never experienced in history, and Russia’s response would be immediate.

So what could define actual consequences actually be? Well, let’s look at the facts. Firstly, Russia supplies 40% of Europe gas, and is the world’s third largest producer of oil.

So it’s pretty safe to say, they have a huge influence on the markets, which can have a direct impact on both your home energy bills, and at the gas station. To be honest, we’re already facing a record increase in energy bills and oil prices are at an eight year high. So this will just be another nail in the coffin.

Secondly, Ukraine is very important to the world’s agricultural industry. I’m talking about wheat, rye, barley and other grains. In fact, it produces a quarter of the world supply, and half of its sunflower production as well.

Putin could choose to affect it supply as a retaliation move, which would halt Ukraine’s production, and double global wheat prices. The knock on effect of this could cause a spike in global food prices, and worst case scenario, we could be looking at rationing, and we haven’t seen that since World War II.

This will just mean everyday investors have less money in their pockets at the end of each month for investing in their future. It may not seem like a substantial increase on paper but when you consider compound interest, that little amount could add up to thousands of lost dollars per person.

As we know, commodities like gas and oil are intrinsically linked with companies. So let’s talk about the impact that this could have on the stock market, and your investments.

Russian stock have crashed as much as 45% in one day. The biggest single drop in history. The Ruble has also hit record lows against the dollar.

And it’s fair to say, global stock markets are also very volatile but it’s important to remember that the stock market is a leading indicator, which means it’s reacting to things that are potentially six to 12 months in the future.

So when the worst happens, it’s almost always priced in. This is why when the official news hits, the markets don’t actually respond as violently as you might expect.

The direct opposite of this is a lagging indicator, which will be something like the unemployment rate. This is good to remember because when things are often looking the worst, and everyone is freaking out, it doesn’t necessarily mean that the markets are going to crash further.

Of course, I’m not saying they won’t dip. However, you shouldn’t be controlled by your fear as you’ll probably end up selling out at the wrong time, which is never a good thing.

Inflation is currently a 40-year high. And as Jason Hollands, a broker at Bestinvest said, “Rising energy prices would ramp up inflationary pressures and likely lead to continued interest rate rises.”

Because of this, investors are looking for places to put their money in order to hedge against inflation. A hedge is essentially a fancy tactic that investors use to protect themselves against losing money in the markets.

One strategy that is commonly used is investing in the stock, Europe 600, which is a lot like the S&P 500, but tracks the top European companies.

If you buy into this index, then you own a small part of all of the companies held within it. This is often seen as a hedge because of the luxury brands included in an index such as Louis Vuitton, Balenciaga and Gucci.

The idea being that these brands sell at a high price, and their customers can afford to pay extra if they decide to hype the prices up even further. Therefore, the thinking is that investors shouldn’t suffer as much but that’s just the financial theory, and it isn’t actually working at the moment.

Another popular strategy is investing in gold, as it’s seen as a safe haven, and this is currently playing out as we speak. The price of gold has been pretty flat over the past few months despite the high inflation we’ve been seeing.

However, now with tensions increasing between Russia and Ukraine, the price has increased by more than 5% just this month. There are two ways to invest in gold.

The first would be to actually buy physical gold like gold coins or a gold bar. And the second is to invest in a gold ETF. Many investors prefer the first option as they know where it’s stored rather than just owning the paper asset.

Gold is worth buying as it’s got a limited supply. They’re not making any more of it. This isn’t technically seen as an investment but instead, a store of value but that’s just the stock market.

We haven’t even mentioned crypto yet. Joseph Edwards, the Head of Financial Strategy at the crypto firm, Solrise Group said, “We’ve seen what we’d expect so far, Bitcoin and crypto markets following stocks, all things tend to correlate in a crisis, and we’re expecting similar here. So worst is likely to be in store over coming days.”

I’d imagine this is because people see themselves losing money with stocks, so they decide to take their money out of higher risk assets like crypto.

But the truth is, there isn’t really any long-term data spanning a crisis of this magnitude, as Bitcoin was only created in 2009. But in my opinion, many alt coin and momentum investors won’t last through a period like this should the worst case happen.

The stock market has been absolutely wild-like due to highest inflation in 40 years. The fed raising rates, decrease demand, and more.

Many of your favorite investments are most likely in free fall but in times like these, I always remember that it’s just what investing is like. For many people that have just got into investing during the bull market, this might be a harsh slap back to reality but there are good and bad times.

I should know. I have been around a while. This might even be the perfect time to pick up some good deals. Just remember, when investing your capital is at risk.

As for how I’m adapting my strategy, I’ll tell you more about that later as it does depend on the next topic we’re about to discuss. The biggest companies in the world are in the tech space.

I’m talking Google, Apple, Microsoft and Tesla. The big boys. And I’m invested in all of them but they have one big vulnerability, cyber attacks.

If you cast your mind back to 2012, Barack Obama wrote, “In a future conflict, an adversary unable to match our military supremacy on the battlefield might seek to exploit our computer vulnerabilities here at home. Taking down vital banking systems could trigger a financial crisis.”

And if you think about Russia, what comes to mind? One word, hackers. So one way Russia could choose to retaliate against sanctions, put on them by the rest of the world is through cyber attacks.

I remember in the UK, we had a less severe hacking incident that left our whole medical systems down, and doctors just didn’t know what to do. They couldn’t even access patient files.

83% of the world now owns a smartphone, and it’s estimated by 2026, nearly 8 billion people will have one. We are getting more and more digital, which makes cyber attacks a whole lot worse.

If Russia hacked a big company like Apple, imagine how much data they have on all of us. Not to mention, they could probably spy on you through your phone camera.

This could lead to a lack of trust from investors in the tech space, which would then heavily impact the S&P 500 as the five biggest tech companies now make up 17.5% of the index.

I mean, imagine trying to get a free $10 worth of Bitcoin from Coinbase but you can’t because they’re hacked. Looking at the facts. One in three Americans are impacted by a cyber attack, and one takes place every 39 seconds but they’re not always severe.

As you can probably imagine, the worst case scenario of these cyber attacks could be catastrophic. I’m talking cash machine failing, leaving people unable to access their money, and public transport just buckle in.

We’ve never seen a full-blown cyber war between countries, and have no idea what the true consequences could be for our financial systems. Just imagine how many cyber attacks have taken place in the last five minutes.

It’s shocking. The illness and shock waves throughout our economy. And I was worried, this was just the start of our crisis period.

What I mean by this is according to “The Fourth Turning” by William Strauss and Neil Howe, history repeats itself in 80 year blocks, roughly a human lifetime, and is split up into 20 year turnings.

You probably know these as generations. The first year turning is a high. Then an awakening. Next, an unraveling. And finally, a crisis. That’s what we’re in now.

The good news is that after the crisis comes the high, and millennials are meant to be the heroes of this crisis. And Gen Z will usher us into the next high period with their creativity.

So as far as my investing strategy goes, I’m adjusting my tech stocks and holding firm on my index funds as well as ever so slightly reducing the rate at which I buy crypto, as I just can’t predict exactly what will happen.

But if the 80 year history blocks repeat themselves like they always seem to do, I think investors will weather the storm as long as we have enough time to hold.

So with that said, if you’re slightly older, it’s probably a good time to diversify into safer investments. Today, I wanted to focus on the financial impacts of this crisis. But I do want to say my thoughts are of course, with everyone in Ukraine, dealing with the unimaginable.

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