The unprecendented level of financial restrictions being thrown at the Russian economy by Western authorities is I suspect beyond Vladimir Putin’s expectations. He had ensured that Russia was well supplied with reserves before starting his invasion but they will be running down at a very rapid rate. The popuation has also become nervous and I read that cash withdrawals from Russian ATMs were at over 50 times normal levels last week.
This morning the Russsian Central Bank has set interest rates at 20% and told all companies to sell 80% of their foreign currency reserves, obviously hoping to counter the massive decline in the value of the rouble. I would anticipate large sales of gold from Russian reserves at some stage, which may knock the price temporarily.
I don’t intend this morning to run through the likely exact consequences of this obviously panic reaction: you will be able to work some out yourself, I am sure.
What I did want you to be aware of is that there may well be extreme volatility in the price of some assets as currencies and commodity prices swing rapidly. Furthermore, the inflation headwind will pick up as commodities that come out of Russian and Ukraine (not just oil and gas, but things as diverse as wheat and wiring looms for German cars) are subject to supply issues.
Other more ghastly apects of the war and international reaction to it will bear on markets, of course.
This will all however very likely be temporary, so investors with diversified portfolios should not worry about paper losses and await the buying opportunities that will become obvious when things get back to normal.
You may be interested in modest anecdotal evidence that comes my way because my partner has Russian contacts from USSR days and it is that in spite of Putin’s control of most of the Russian media, at least some ordinary Russian citizens do know what is going on and are appalled.