Observations, (likely) Implications & View - March 2022


Observations, Implications & View:

#1

Ukraine indicates it is ready to drop plans for NATO membership:

https://www.business-standard.com/article/international/russia-ukraine-war-zelenskyy-says-no-longer-interested-in-nato-membership-122030801616_1.html

 

#2

UAE, Saudi kingdoms choose to ignore the USA:

https://nypost.com/2022/03/08/saudi-uae-leaders-ignore-biden-when-he-calls-to-talk-gas-prices-report/

 

#3

VISA, Mastercard suspend operations in Russia:

https://www.cbsnews.com/news/visa-mastercard-russia-ukraine-invasion/

 

#4

Rating Agencies cut the Russian debt ratings:

https://www.wsj.com/livecoverage/russia-ukraine-latest-news-2022-03-08/card/fitch-sees-imminent-russian-default-as-it-downgrades-again-YlyD4VdcSKi7dCdYkdDu

 

https://www.reuters.com/business/finance/moodys-cuts-russia-rating-ca-rise-default-risk-2022-03-06/

 

Observations, Implications & View

  • The trust on the might (and likely implementation of promises of protection) by the US/NATO seems to have been impacted.
  • The might and status of the sole superpower (going by conventional wisdom) appears to have taken a beating. 
  • The above developments indicate that the agencies controlled by the US are not averse to siding with the former even on non-business and political matters. 
  • There is a curious case of Russian debt downgrade to near junk basis on Political events, while the standards are not universally applied for others.

  

Observations, Implications & View

  • The above indicates a likely probability that the so far accepted position of Global Currency order may be challenged. Also, in the same vein the undisputed position of the USD may change in the coming decade.

  •        The above indicates a likely probability that the so far accepted position of Global Currency order may be challenged. In the same vein the undisputed position of the USD & dichotomy in market perception of economy and debt is perplexing, and may normalize in the coming decade. The Chief Economist of largest Indian Bank, highlights the curious case of this dichotomy. While developing economies (running CAD) get penalized with Currency depreciation & hardening Interest rates, the US, which runs the largest CAD (23x Indian CAD or Current Account Deficit) is seeing rising US treasuries (which by the CAD logic should have been at all time lows). Source: https://indianexpress.com/article/opinion/columns/navigating-economic-uncertainties-caused-by-ukraine-war-7807512/) 

  • A currency related re-allocation and portfolio rebalancing can wreak high volatility on asset prices and subsequently global markets. 
  • Gold and other safe haven asset classes may see renewed interest.
  • Inflation and resultant monetary policy response can also develop differently for different Geographical regions, unlike the norm seen in recent times.



Chart Source: https://goldprice.org/gold-price-chart.html


Note: I tried to embed the graph but wasn’t able to do it. Probably due to some technical glitch/ lack of IT ability on my end.

Disclaimer: The above are personal opinions. They are not a solicitation or Investment advice.

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