Although this conflict may contribute to existing inflationary pressure and tighter lending conditions, the potential drag to growth comes at a time when economic momentum was rebounding. For example, the preliminary reading of the composite purchasing managers index (PMI) climbed to its highest level in six months in February. Prior to these recent geopolitical events, the European economy reported a much better-than-expected rebound from the COVID-19 omicron variant. Investors should not become single-mindedly focused on the conflict in Ukraine and take their eyes off economic indicators.
Source: Charles Schwab, Ministry of National Defense of ROC (Taiwan) data as of. However, these overflights happen every day, according to Taiwan’s Ministry of Defense, as you can see below.Ĭhinese aircraft entering Taiwan’s air defense zone are a near-daily occurrence Stoking fears early Thursday were reports that nine Chinese military aircraft entered Taiwan airspace, with some suggestion that China was taking advantage of a distracted NATO. By contrast, a potential Chinese invasion of Taiwan would involve large economies that play a critical role in a wide variety of global supply chains. Russia and Ukraine are relatively small countries from an economic and supply chain perspective, excepting a few commodities. This contributed to the muted market reaction.
Because energy makes up 60% of Russian exports and 30% of its gross domestic product, Russia may be more inclined to reap the windfall from high prices than to deny itself critical revenue at a time when its economy is at risk of recession.Īvoiding impediments to Russia’s ability to sell oil significantly weakens the impact of sanctions, but also reduces the risk of major worldwide economic disruptions. and EU leaders are not targeting Russian energy exports and Russia is not threatening to cut off oil and gas shipments in retaliation to the sanctions. These sanctions are designed to hurt Russia’s economy without affecting global energy and agricultural supplies in a way that could inflict a "stagflationary" shock (the combination of high inflation and low growth) on the rest of the world. As expected, the United States and the European Union announced a new tougher round of sanctions on Russia on Thursday in response to the invasion, with other major global economies following suit. The chaos on the ground in Ukraine contrasts with the clarity on sanctions. The potential for global economic disruption from an invasion was most likely to come from sanctions. Past performance is no guarantee of future results. *Turkey is a member of NATO, now and at the time of the event.
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