It seems as though these days the markets become swayed by practically anything. Yet as Russian mercenaries marched towards Moscow, with President Putin stating the country was on the brink of “civil war,” the markets didn’t seem to have any type of major reaction.
The insurrection was defused quickly, yet even still. The march on the capital put Putin’s 23-year authority into major jeopardy for the first time. That challenge could suggest that the president’s hold on the country is weakening.
So, why didn’t investors care?
Sanctions already in place
This wasn’t the same as when Russia invaded Ukraine. After the invasion, Western countries were quick to bring down sanctions against Russia. Russia has since dropped out of the top 10 economies in the world, though it remains the largest supplier of energy.
That supply, however, isn’t going west. Instead, its headed to China and India. So, again, with little investment in the country for now, there was little market reaction. But analysts perhaps think there’s more to come.
Russia remains a large producer of fertilizer and energy, and should uncertainty remain, that could drive prices higher. Investors may have noted this over the weekend with the price of wheat climbing in reaction. Gold futures also rose slightly, but it seems as though the reaction may be muted for now. As if the markets are kicking the can down the road.
Uncertainty on top of more uncertainty
The question remains whether further internal strife could occur once more in the country. Yet until that happens, it doesn’t seem as if the markets will care. As long as commodity prices don’t spike, the markets will likely continue to ignore political volatility in the country.
In fact, while the world over wants the war in Ukraine to come to an end, it seems a takeover in Russia could be a major driving factor of bringing down the markets. That’s because with the chaos of overthrowing a government, comes major uncertainty. As the saying goes, it’s better to deal with the devil you know rather than the devil you don’t.
How investors should react
Investors continue to expect uncertainty in the markets and will likely continue to do so in the near future. The TSX remains down, with the S&P 500 also dropping slightly in the last month, after five weeks of solid growth.
This uncertainty means protect yourself through anything stable, but low-cost exchange-traded funds (ETF) against an index would be a great way to protect yourself. One of the top choices would be the Horizons S&P 500 Index ETF (TSX: HXS), which attempts to replicate the growth of the S&P 500.
Shares of the ETF are up 18% in the last year, as of writing. It also has an incredibly cheap 0.10% management expense ratio, so you’re not losing your investment paying for salaries. It’s an uncertain time, but the S&P 500 over time does incredibly well. So, investing in its performance through an ETF like HXS, will certainly help you sleep better at night — especially as the ongoing drama in Russia continues to unfold.
