«Nothing is more difficult, and therefore more precious, than to be able to decide.»
Ukraine holds a special place in the Russian thinking. Since 2014, and increasingly in 2021, the Russian elite has used historical and cultural reasoning to argue that Ukraine belongs to Russia’s sphere of influence. In 1994, the United Kingdom, the U.S. and Russia solemnly promised to respect Ukraine’s sovereignty and borders in exchange for giving up nuclear weapons. Why is this memorandum not being mentioned as a prelude to de-escalation of the Ukraine crisis?
Tensions in the Ukraine-Russia crisis have been simmering for more than two months, and diplomatic efforts to resolve the issue show little sign of progress. Russia has deployed more than 100,000 troops on its border with Ukraine, sparking Western warnings of an imminent invasion. Moscow, which has repeatedly denied its invasion plans, says it is responding to aggression by NATO allies and dismisses those warnings as “hysteria”. It is difficult to assess what is taking place, since Russian troops may have already entered Ukraine without incident.
Not only Ukraine but also Taiwan, both being small powers grappling with a persistent, and recently growing, threat posed by greater powers, in the first case Russia, in the second China, who both believe these states are rightful parts of their territory or at least sphere of influence in the case of Ukraine. This takes place in a context of heightened global tensions and great power rivalry. The U.S. is a part of both conflicts, although it has not extended the same security guarantees to Ukraine as to Taiwan. As a relatively small state bordering Russia, Norway is interested in maintaining the rule of law and the current international order. In this regard, it is in Norway’s interest to support NATO and EU initiatives vis-à-vis Russia. However, Norway also has a longstanding tradition of successful bilateral cooperation with Russia and maintains dialogue where possible. This is essential at a time of heightened tensions and especially when perceptions of reality continue to diverge. A key problem in this escalating situation is that neither side can offer many, if any, concessions – neither Ukraine, nor NATO, nor Russia. In this case, Norway has little room for manoeuvre and or influence as far as to de-escalate Russia and Ukraine tensions.
Market corrections occur quite frequently and can be described as a regular component part of investing. When the stock market keeps rising steadily for an extended period, there comes a point when the talking heads on television start forecasting a correction. What’s a correction? Nothing more than a moderate decline in the value of a market index or the price of an individual asset. A correction is generally agreed to be a 10% to 20% drop in value from a recent peak. Corrections can happen in the stock market, in a commodity index, or even in the shares of your favourite tech company. “Say the words market correction and many investors immediately think of a crash or a bear market, with the panic-inducing idea that they’ll be living on Ramen noodles through retirement,” says Joseph Hogue, chartered financial analyst (CFA) and a former Wall Street investment analyst. “In reality, stock market corrections happen relatively frequently, and they aren’t nearly as bad as you might think.”
Figure 1: Stock market corrections are fairly common. Pullbacks of 10% or more occurred in 14 of the past 22 years. (annual Performance of Global Equities in green and largest drawdown in red).
The coming weeks and months will show if the recent market volatility has already reached its highs or whether the turbulence might continue. In any case we must remember that market pullbacks are not uncommon and occur in every year. These corrections are considered healthy because they realign valuations, albeit at the time they happen they do not feel healthy at all. Markets are volatile, although volatility has been below average for some time now. Successful investors follow a long-term strategic asset allocation plan, and adherence to that plan is a prerequisite for achieving financial goals set.
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Your JIMAG Team