The unprecedented economic war already being waged globally is jaw-dropping. Virtually all large cap companies have stopped or abandoned service in Russia, from discretionary providers (Ikea) to core infrastructure (Visa, Mastercard, Amex). Companies like Boeing have stopped selling spare parts to Russia while abandoning titanium mining agreements that provide raw materials for said spare parts globally.
Globalization in some ways is a deflationary force. Jobs shift to lowest wage locales, supply chains shift to lowest cost locales, and at the end of the day, the consumer gets a far lower price. If countries, including western nations, must now consider that the locale in which they utilize to lower cost allows for true economic independence from adversaries, unquestionably costs must rise as lowest cost locales don’t always fit that description. China is a massive US trade partner, and while it seems relations are stable now, one may wonder how quickly western companies (and China) may react if it eventually sides with Russia economically as an ally. The ramifications both logistically and economically to replumb how companies operate are enormous.
While the prior discussion is broad strokes, the impact from exclusion of Russia from the world economy via sanctions is still clearly unknown. The global interconnectivity hasn’t been tested in such a way and thus the potential effects are largely unknown. Furthermore, and on a more positive note, humans are highly adaptive to new situations. Changes that, before the fact, seemed devastating or impossible often get solved via the ingenuity and creativity of humans in desperate times. The Covid vaccine is a prime example.
To conclude, as an investor, I think that fear in the market is high right now as I have discussed ad nauseum, the probabilities of outcomes have widened substantially. Some will invest substantial capital today and make good money. Some may do the same and impair capital. Keep calm and carry on.