How to Invest as Geopolitical Tensions Rise
Biden’s reversal on long-range missiles … Putin puts nukes into the spotlight … gold and oil stocks climb … should you be hedging your gains?
As I write Tuesday afternoon, the market is shaking off Russia-related geopolitical concerns that have been building over the last two days.
While that’s good for this bull market, let’s not overlook the risk of what’s happening.
To unpack this, let’s rewind to September. As the U.S. mulled authorizing Ukraine’s use of Western-made long-range missiles to strike deep inside Russia, Russian President Vladimir Putin said:
If this decision is made, then it will mean nothing less than the direct participation of NATO countries—the U.S., European states—in the war in Ukraine. And that will substantively change the very essence, the very nature, of the conflict. It will mean NATO countries are fighting against Russia.
Putin would go on to add:
Russia reserves the right to use nuclear weapons in case of aggression, including if the enemy using conventional weapons poses a critical threat.
With this as our context, here’s a Wall Street Journal headline from yesterday:
Biden Approves Ukraine’s Use of Long-Range Missiles Inside Russia
This is a reversal of Biden’s prior reluctance to authorize such weapons use. As to what might have changed, deputy national security adviser Jon Finer indicated that the introduction of thousands of North Korean troops onto the battlefield on behalf of Russia has influenced the Biden administration’s position.
This morning brought news that Ukraine has already launched these long-range missiles into Russia
The Russian Defense Ministry reports that its air defenses shot down most of the missiles. The fragments of one made it through Russia’s defenses, apparently hitting a military target but there weren’t any casualties.