The war
The war is now going on for more than a month. Every other day there are rumors that progress has been made with regard to negotiations and the Russian army is failing or withdrawing, but the bombings are going on and more and more Ukrainians are fleeing (~4mn at the time of writing).
In contrast, the major stock market indices, in particular the US indices but also the DAX are at the same level or even higher now than before the invasion. BTFD has worked and again and these days “anything is good for stocks” seems to be the only motto.
One explanation that I have read is that Russia and Ukraine are only 2% of Global GDP, so a “loss” of these countries is no big deal. Personally, I do think that this is not a very useful number. Russian oil and gas is powering a significant amount of European (and Global) GDP. A supply disruption from Russian oil and gas would impact a much larger share of GDP globally and might make Covid-19 supply chain disruption like a toddler party. But the oil and gas is still flowing, so why worry ?
Just a few days ago, the CEO of BASF gave an interview warning against a full embargo against Russia, because it will “destroy the German economy”. He was stating the obvious, but especially BASF in my opinion shares a lot of responsibility for the dependency on Russian gas.
As for the endgame: As much as I hope for a quick, clean victory for Ukraine, I do think that this is the most unlikely scenario. Russia and Putin cannot afford to lose which is also the essence of an interview with one of Putin’s former advisors.
Tunnel vision
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value and opportunity 