Russian Economy Long Term Political Chess Match
Geopolitical Outlook
There is huge fear surrounding Russian investment and you often see investors holding tight stop losses leading to a very new reactive market. Putin is no stranger to the political chess game. The Russian economy has taken a slight pullback recently with the tensions in Ukraine and the emergence of the ... bug variant that recently emerged. In regards to the military build-up near Ukraine's borders, this is almost certainly an effort to gain political leverage to force the EU and US into accepting the Nordstrom two pipelines and prevent/remove sanctions on Russia. Where Ukraine's recent attempts to join NATO and the military build-up has the possibility to lead to war; it is more likely that Putin is posturing in an effort to begin UN talks where the resolution is an acceptance of the pipeline will ensure no further military build-up and troop withdrawal from the region.
Additionally, there is a horrible energy crisis in the EU leading to increased pressure of politicians to accept the pipeline. This could be the event that justifies the cooperation with Russia that will be labeled as a huge success in reducing tensions with Russia when in reality Russia is just going to gain large pricing power and a huge consumer of natural gas and oil.
If you're bullish on oil prices GAZPROM and subsequently the Russian markets will far outperform US oil stocks.
Technicals
The technicals outlined on the chart are not the strongest and overall I would rate the technicals of RSX as neutral to bearish.
Holdings
30% of Russia's GDP is from natural gas and oil
A fifth of world oil and gas is produced by Russia
40% of RSX's holdings are in Gasprom (an oligarch-owned mega-producer of oil and natural gas and the owner of the Nordstream 2 pipeline.
Monetary Policy
Russia is currently experiencing a fierce inflationary cycle and if you look at 2014 during the same inflationary pressures the Russian markets saw significant pullbacks even with attempts by the Russian Central bank by raising rates all the way to 17%. This rate raise caused further pain in the market. However, if you compare 2014 to the current inflation you can see that rather than being reactive to inflation Russia was reactive in 2014 where they were proactive in 2021; raising rates prior to inflation surges. It is my opinion that Russia will not have to raise rates to these levels because they were proactive with the inflation and we will see a down turn in the inflation rate.
There is huge fear surrounding Russian investment and you often see investors holding tight stop losses leading to a very new reactive market. Putin is no stranger to the political chess game. The Russian economy has taken a slight pullback recently with the tensions in Ukraine and the emergence of the ... bug variant that recently emerged. In regards to the military build-up near Ukraine's borders, this is almost certainly an effort to gain political leverage to force the EU and US into accepting the Nordstrom two pipelines and prevent/remove sanctions on Russia. Where Ukraine's recent attempts to join NATO and the military build-up has the possibility to lead to war; it is more likely that Putin is posturing in an effort to begin UN talks where the resolution is an acceptance of the pipeline will ensure no further military build-up and troop withdrawal from the region.
Additionally, there is a horrible energy crisis in the EU leading to increased pressure of politicians to accept the pipeline. This could be the event that justifies the cooperation with Russia that will be labeled as a huge success in reducing tensions with Russia when in reality Russia is just going to gain large pricing power and a huge consumer of natural gas and oil.
If you're bullish on oil prices GAZPROM and subsequently the Russian markets will far outperform US oil stocks.
Technicals
The technicals outlined on the chart are not the strongest and overall I would rate the technicals of RSX as neutral to bearish.
Holdings
30% of Russia's GDP is from natural gas and oil
A fifth of world oil and gas is produced by Russia
40% of RSX's holdings are in Gasprom (an oligarch-owned mega-producer of oil and natural gas and the owner of the Nordstream 2 pipeline.
Monetary Policy
Russia is currently experiencing a fierce inflationary cycle and if you look at 2014 during the same inflationary pressures the Russian markets saw significant pullbacks even with attempts by the Russian Central bank by raising rates all the way to 17%. This rate raise caused further pain in the market. However, if you compare 2014 to the current inflation you can see that rather than being reactive to inflation Russia was reactive in 2014 where they were proactive in 2021; raising rates prior to inflation surges. It is my opinion that Russia will not have to raise rates to these levels because they were proactive with the inflation and we will see a down turn in the inflation rate.
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