Back in the USSR?

So far the markets have shrugged off Russia’s aggressive actions towards Ukraine and the Crimea. Will this continue?

Russia’s expansion in Crimea and eastern Ukraine haven’t affected US markets much, although the German stock market fell over 10% in July. But Ukraine is small, economically, with an economy slightly bigger than Alabama’s. Their principal exports are iron ore and steel. This crisis has set other factors in motion, though.

Sweden and Finland have recently tightened their ties to NATO—a natural consequence of their connection to the European Union. At present, Sweden has no rules governing how this might happen; they haven’t been part of any alliance since the Napoleonic Wars. And Finland used to be part of the Russian Empire. Helsinki is only a five-hour drive from St. Petersburg. Ominously, Finland recently reported Russian military aircraft violated its airspace three times in the past week.

The markets wouldn’t shrug off issues in the Nordic region. Their economies constitute almost 10% of Europe’s GDP, and they’re just north of Germany. Baltic trade is booming; geopolitical tensions in Northern Europe matter a lot more to the US than problems along the northern coast of the Black Sea.

Vladimir Putin is a hockey player, and his politics and policies reflect a fluid, aggressive style. Thirty-four years ago a bunch of unknowns from the Midwest and New England upset the vaunted Soviet hockey machine in the “Miracle on Ice.” Can we do it again in the geopolitical arena? This time there’s more than Olympic gold at stake.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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