Ukraine-Russia Conflict: Is Market Volatility Reversing?


Edward Cachia is the founder of Machia, a management consulting firm focusing mainly on politics and public affairs dealing with strategy formulation and execution for various industries. He also has almost 10 years of experience in the investment management area, some of which were direct within the Maltese industry.

Is A Market Resurgence Underway? 

The recent conflict between Ukraine and Russia has been a disastrous affair that is to benefit to no one. The fear of this conflict to go beyond these two countries is ever-present with global financial markets crashing on a day-to-day basis. However, we are currently seeing

financial markets, especially European ones, resurge. 

Are we currently seeing a reversal back to normality?

 In short, not exactly.

Markets tend to reach what I call a ‘realisation phase’ which is when investors start realising if the market is overestimating its risk compared to the situation in hand. The war is still ongoing, but market prices are still ongoing. Moreover, food commodity prices have also started to go down across all future contract prices, albeit still significantly above the closing prices of 22nd February; the last day before the war was initiated. These changes in prices show that markets have entered this phase and are currently pushing share prices upwards. This even more so, when one uses charting signals such as RSI and MACD that show
reversal opportunities in specific share prices.

In addition to the phase, the war has not yet peaked in severity. According to Machia’s risk scenarios, specifically created for this particular war, Russia is still expected to use chemical and/or biological weapons on one and/or two cities in Ukraine, primarily Mariupol and/or Kharkiv.

When this takes place, market will once again retreat back to before when the ‘realisation phase’ started with unrealised gains getting wiped. Therefore, one must not state that this reversal back to normality is actually taking place, because what has set off this market crash has not yet been settled. 

We are still far from normality in our lives, even more so from a financial markets perspective. However, as it happened once again, the ‘realisation phase’ will reappear within markets with various opportunities opening themselves up once again. So, for those investors that missed the first chance of making investment gains in this rise, do not fret. There is a possibility for such an opportunity to remerge once again, possibly within the next six months. 

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