The invasion of Ukraine changed everything for Wall Street | Economy

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of Russian President Vladimir Putin decision to invade Ukraine last week shattered the security order in Europe that had existed since the end of the cold war. It also forces investors to consider whether they should adapt to a world that has changed for good.

“I think Russia’s invasion of Ukraine marks nothing less than a change from the largely US-Western dominated world order that has prevailed since the fall of the Berlin Wall. “said Michael Strobaek, Global Chief Investment Officer at Credit Suisse. in a note to customers on Friday.

Before Russian troops swept into Ukraine, triggering punitive sanctions Western countries shocked, Wall Street’s main concern was not with Putin, but with Federal Reserve Chairman Jerome Powell.

What the Fed will do next to contain inflation, which has been rising at the fastest pace in decades, has been the subject of intense speculation. Increasingly, traders braced for the Fed to aggressively raise interest rates from the lows and begin to shrink the size of its massive balance sheet, which it has built up to support the economy for the pandemic.

Governor Christopher Waller Thursday argued for a possible oversized hike of 0.5 percentage points in March to “convey [policymakers’] determination to deal with high inflation, of which there should be no doubt.”

But even this decision could be influenced by what is currently happening in Ukraine.

“It is possible that the state of the world will be different as a result of the Ukraine attack, and that may mean that a more modest tightening is appropriate, but that remains to be seen,” Waller continued.

On the one hand, inflation is should increase further in the short term following the invasion, which drove up energy prices and disrupted the market for key agricultural commodities such as wheat and corn. On the other hand, the Fed does not want to raise rates too quickly and trigger a recession.

“It’s going to put them in a bit more of a sticky position,” Ben May, director of global macroeconomics research at Oxford Economics, told me.

Yet, according to Strobaek, what changed when Russia invaded Ukraine goes far beyond the Fed.

“Russian President Vladimir Putin intends to reposition Russia as a powerful nation whose strength lies in its energy and raw material resources as well as its military,” he said. “This is likely to have significant implications for security arrangements in Europe and globally.”

In addition, Strobaek continued, other world powers like China are closely watching the development of the conflict and the West’s reaction.

“We are now heading towards a new multipolar world,” he said.

This means that investors will have to think differently about how they deploy their resources.

“At the dawn of a new world order, investors need to choose their asset allocations carefully,” Strobaek said. “Systematic and robust investment processes and due diligence procedures before investing will become even more crucial. Active investment will become more important given the potential for changing economic, political and social developments in different regions.”

Sanctions against Russia could hit these Western companies

International companies with a strong presence in Russia are preparing for more sanctions from Western countries.

Russia has already paid the price for its aggression. Stock markets and the country’s currency fell last week after Putin ordered troops to Ukraine.

Sanctions from the United States and European nations intensified as leaders of Western nations condemned Russia’s actions. Putin warned Russian business leaders on Thursday that he expected further “restrictions” on the economy, but called on businesses to work “in solidarity” with the government.

Here are some Western companies that could be exposed to tumult.

PA: British oil company BP is the largest foreign investor in Russia with a 19.75% stake in the country’s national oil company, Rosneft. It also has stakes in several other oil and gas projects in Russia.

Danon: The French yogurt maker Danone controls the Russian dairy brand Prostokvanhino and accounts for 6% of the country’s total sales.

ExxonMobil: The American oil giant has more than 1,000 employees in Russia and has been present in the country for more than 25 years. Its subsidiary Exxon Neftegas Limited holds a 30% stake in Sakhalin-1, a vast oil and gas project located off the island of Sakhalin in the Russian Far East. It has operated the project since 1995 on behalf of a consortium that includes Japanese and Indian partners, as well as two Rosneft subsidiaries.

McDonald’s: The burger chain has ranked Russia as a high-growth market and has continued to open locations there over the past decade.

Mondelez: The Oreo maker and owner of Cadbury became Russia’s top chocolate maker in 2018.

following

Monday: India’s GDP data; Earnings from Lordstown Motors, Groupon, HP, SmileDirectClub and Zoom Video

Tuesday: US and China manufacturing data; Gains from AutoZone, Baidu, Domino’s Pizza, Hostess Brands, JM Smucker, Kohl’s, Target, AMC Entertainment and Salesforce

Wednesday: European inflation data; Earnings from Abercrombie & Fitch, Dine Brands, Dollar Tree, Snowflake and Victoria’s Secret

Thusday: ISM non-manufacturing index; Earnings from Best Buy, Weibo, Costco and Gap

Friday: US employment report

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