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The fog of war applies to markets too

With BBC’s Katty Kay on MSNBC this morning suggesting the possibility that Russia may launch a tactical nuclear warhead in the next couple of weeks, all bets are off with regard to the future of market stability, let alone peace and security that the world has enjoyed for the last 70 years. I almost miss the days of contemplating the end of US democracy and Covid variants; nothing compares to the actions of crazy-man Vladimir Putin who has already set in motion a new course in world history.

The Russian bond market reopened this morning with bond prices holding due to central bank intervention. Russia escaped default by a last-minute deal to make their debt payments in dollars. The stock market there has yet to reopen and no news on when it will reopen.^1 Russian sanctions had a limited impact on war operations so far, as expected, but it may help in preventing the accumulation of war-tech in the longer term. Russia has never been an essential element of the global economy other than being a major supplier of energy, 60% of EU gas came from Russia (3% of US gas). They also have agriculture exports now curbed resulting in an expected increase in world hunger. Ukraine’s export disruptions will also have an effect on world hunger, as well as electric vehicle production as more than half of the world’s lithium comes from Ukraine.

Investors have already been warned of the implications of rising rates and inflation but the Russian war has changed the dynamic, plausibly exasperating its effects. Notably, investors who diversified into hard assets, such as gold and oil, have seen portfolios hold up against interest-rate sensitive investments, such as bonds and tech stocks. Long-term US government treasuries, a world staple with 200 years of guarantee, have seen a dramatic price drop since the announcement of the rate increase. The iShares 20+ Year Treasury ETF “TLT” is down about 13% year-to-date. The iShares Aggregate Bond ETF “AGG”, which is heavy in mortgage debt, is down 5% over the same time period.

With bond prices dropping and yields rising, one begs the question if to hold treasury bonds at all. But when Katty Kay warns of a nuclear attack, all bets are off, and those who held onto treasuries will be glad they did if the worst happens. According to, in 1950, “the prospect of World War III created the anticipation of the return of the inflation, price controls, and rationing of wartime. Commodity prices and purchases of consumer durables soared.”^2

At Eureka Wealth Management, I help my clients navigate global turmoil by looking to market history as well as analyzing personal risk tolerance. I also do retirement planning and tax/estate strategies. Call for a free, initial consultation, at (760) 537-0791 or book online at


^1: Russian Bond Trading Resumes for 1st Time Since Ukraine War by AP link


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