The financial markets have been on tenterhooks lately for two main reasons: Russia and rate hikes.
By the time you read this, Russian tanks may already be rolling across the Ukrainian border. If not, we think an invasion of eastern Ukraine will probably start soon after the Olympics, to avoid embarrassing China, which is a Russian ally (for now). Not invading at all after a big build-up of troops, arms, and equipment, would make it tough for Russia to bluff in the future. By contrast, re-incorporating more of Ukraine into Russia would seal for Vladimir Putin an esteemed place in Russian history.
An invasion would likely set off a flight to lower-risk assets, but we don't think it changes the outlook for corporate profits over time, and so any downdraft in equities would be temporary and a buying opportunity.
