🇺🇦 What Russia’s invasion could mean for markets
![Blasting Billie Eilish on the Car Thing [Jose Luis Pelaez Inc. / Digital Vision via Getty Images]](https://cdn.robinhood.com/static_content/mwphzyq69oso/en-US/assets/files/mWyb7tBbhn5th5CjQzlCn_1_GettyImages-bldjp022005_256.jpg)
Hey Snackers,
Not our usual intro: the world’s anxious over growing conflict and loss of life in Eastern Europe after Russia’s aggression toward Ukraine reached a new high. Yesterday, President Biden said Russia violated international law by declaring independence for separatist-held areas of Ukraine.
The wider market slipped into correction territory as world leaders began imposing economic sanctions on Russia. Oil prices hit a seven-year high after Germany halted a key gas pipeline in response to Russia’s aggression. Bitcoin and other cryptos plunged as investors abandoned riskier assets.
How the escalating Russia-Ukraine conflict could affect markets — short and long term
Stocks are down — what's new?... ICYMI: stocks have been falling all year as investors worry about inflation and the Fed’s coming interest-rate hikes. This month, there's a new concern: Russia's increasing aggression toward Ukraine. Refresher:
- 1991: Ukraine gained independence from Russia when the Soviet Union fell, but Russia has never fully pulled back its influence there (see: 2014 annexation of Crimea).
- Late January: Russia stationed 100K+ troops near its border with Ukraine, fueling invasion fears among Western leaders.
- Monday: Russian President Putin recognized the independence of two separatist regions in Ukraine (see: this brutal exchange) and ordered Russian troops to enter.
- Yesterday: President Biden said he viewed Russia's move into Ukraine as the beginning of an invasion, and announced the first wave of new US sanctions to cut off Russia from Western financing. Earlier, the EU agreed to ban the purchase of Russian government bonds.
- Also yesterday: Germany halted the key Nord Stream 2 pipeline, which carries gas from Russia to Germany (oil exports = 30% of Russia's economy).
The short-term effect on stocks... The S&P 500 index is down 5% for the month, as Russia-Ukraine tensions add to what’s already hurting markets:
- Uncertainty: While some uncertainty is always a given, high turmoil is usually bad for markets. Investors tend to retreat to "safe-haven assets" like government bonds, gold, and even "defensive stocks" like healthcare and utilities, which tend to be less affected by volatility.
- Inflation: Sanctions on Russia could cause prices of oil, food, and other commodities to soar even more. Russia supplies more than a third of the EU’s natural gas, while Russia and Ukraine produce much of the world’s wheat and corn.
How could markets react long term?… We can’t predict the future, but historically the US market has bounced back from conflicts over time. Since 1941 the total fall in the stock market after major geopolitical events was, on average, 5% — with a couple months to eventually recover. Of course, even if the market recovers, individual stocks might not. That’s one reason some investors diversify to help hedge risk.
Spotify rolls out its first physical product for your car — but don’t call it a hardware biz
Blasting “Good 4 U” in your ’97 Civic… Spotify’s Car Thing is now a real thing. Its first physical product — it’s literally called Car Thing — went on sale in the US yesterday after a limited release last April, when 2M people joined the waitlist. The $90 dash-mounted gadget is meant for cars without infotainment screens, and lets drivers control their Spotify tunes via touchscreen or voice control: It works only with Spotify Premium and requires a smartphone with Bluetooth or an aux cord.
Hard(ware) right turn… Spotify has twice as many listeners as its closest streaming rival (Apple). Now it joins a long list of tech companies that’ve attempted to make the jump from software to hardware. Those efforts have had mixed results:
- Hail Mary hardware projects like Microsoft’s Zune MP3 player and Google Glass AR glasses were discontinued after falling flat with consumers.
- But connected gadgets like Amazon’s Kindle and Google’s Home Speakers succeeded by offering simple integrations with their parent companies’ other products and services.
Not all products are designed to be huge sellers… Since most new cars come with either Apple’s CarPlay or Google’s Android Auto preinstalled, Spotify is launching a product into a market that’s shrinking, not expanding. And it knows that. Car Thing isn’t meant to create long-term revenue — it’s meant to build loyalty and encourage more Premium listening at home, at work, and on the road now. Looking ahead, Spotify says it's focused on audio, not hardware. Its execs have even described Car Thing as a “means to an end.”
What else we’re Snackin’
- Boosted: A handful of new studies suggest that three doses of a Covid vaccine can protect most people for a long time, making the need for a fourth shot potentially less likely.
- Return: Former President Trump is coming back to social media. His social platform, Truth Social, rose to the top of Apple’s App Store downloads after launching on Sunday, despite some glitches.
- Speedy: Volkswagen is considering a plan to spin off Porsche in a possible IPO (Initial Porsche Offering?) as VW looks for cash to fund its EV transition. On its own, Porsche could be worth $100B+.
- Sunset: AT&T became the first US wireless company to shut down its 3G network for good, raising fears that old 3G-connected devices (think: home alarms and bus displays) could suddenly stop working.
- Ripe: Keep the guac coming. The US lifted its ban on avocado imports from Mexico after striking an agreement with Mexican authorities to give American food inspectors more protection from cartel threats.
Wednesday
- Earnings expected from: Lowe’s, TJX, eBay, Public Storage, Molson Coors, Monday.com, Toll Brothers, and Hertz
Authors of this Snacks own shares of Apple, AT&T, Google, Microsoft, Spotify, and Amazon
ID: 2050700