As you know, I give a damn about the global food supply. Five years of academics in agribusiness, economics, and supply chain will do that to you. So, I’m less focused on the Omicron variant and more concerned about Mr. Vladimir Putin. Keep reading for a list of Russian stocks to keep an eye on.
Reuters reported late last week that Russia was moving large amounts of “blood” to the front lines and the Ukrainian border. As my military professor at Hopkins once told a class, pay attention when a military makes this move. It’s a sign that they’re ready to invade.
Terrifying as that simple report is, it has a dramatic level of implication for the broader markets. Now, I said a few months ago that we’ve been in a holding pattern since March 2020 on geopolitical risk.
COVID-19 and an additional $5 trillion in Fed pumping turned the markets into a hallucinogenic casino. Markets had appeared to price out major geopolitical concerns around military exercise.
But now that the Fed is even considering rate hikes and tapering (we’re still NOT there yet as they haven’t pushed the button), we can assess what Russia is going to do and what the impact would be. Here’s the thing – I’m not planning on trading this event.
I plan on watching. Here’s what I’m watching and why.
Watch How This Unfolds
I’m planning on watching how the markets react to any event. The reason is that the Fed’s policy might have SUCH an influence in today’s market moves that we effectively drown out any geopolitical worries. That said – there are specific industries that will be affected by any Russian moves.
Remember that Putin has largely weakened NATO’s resolve and taken this game of chicken far enough to expose the fundamental disagreements between its influencers. That said, Russia already has a serious influence over Europe due the the latter’s suicidal policies around carbon-based energy like natural gas.
If Russia does invade – we’re likely to see higher natural gas prices in Europe and higher food prices around the globe. Notably, I’m keeping my eyes on wheat prices as they could easily push above $10. That fallout would impact Africa and the Middle East at a time that inflation is already cutting into household budgets.
Citizens in Egypt, for example, are among the highest spenders of discretionary income on food. Any serious supply chain disruption or further increase in prices could set off unrest in those regions.
Meanwhile, I think it’s fair to anticipate that we’ll see a potential move on most commodity prices as we bake in a geopolitical premium. U.S. equities might remain balanced and linked to the Fed, while commodities make their first move based on the first major geopolitical event of 2022.
Russian Stocks to Watch
Again, I want to watch the price movements and start to gauge if this event provides clues about how the market will react to the dozen other major geopolitical challenges that this market faces in the year ahead.
My watchlist for this event consists of the following:
- Russian energy stocks like Gazprom – Rosneft – RusHydro – which all trade over-the-counter.
- The Teucrium Wheat Fund (WEAT), which would experience inflows by speculators, even if they fail to understand how this fund actually works.
- Shipping stocks that have exposure to the Black Sea.
- Russian ETFs like ERUS, RSX, DEM, RSXJ.
- Russian-based companies that still trade in U.S. markets like MBT (Russian telecom).
This will be an important lesson in price movement and discovery. Here’s hoping that it’s all a game of chicken…