Energy-Based Russian Markets Provide an Alternative in U.S./China Tension Era


Could Russia, which is somewhat of a dark course in world markets, be a source of enthusiasm for investors right now?

Today New York Times writer Matt Phillips is pointing to strong Russian equities and a “buoyant ruble” as some factors in solid growth for Russian financials.

Russian stocks are up more than 28%, he points out, over the year, as S&P 500 has risen 16%.

One big factor, as Phillips also points out, is crude oil prices, which have risen over time. But there’s also the idea that a lack of geopolitical tension works in Russia’s favor.

Phillips goes into detail on a timeline where official U.S. actions against Russia and the threat of impending sanctions depressed some of this economic positivity. Today, by contrast, the U.S. administration is drawing it sights publicly on China, and neglecting to focus on any kind of protectionism vis-à-vis Russia. That seems to have a further emboldening effect on Russian stocks and Russian prowess in the global economy.

A subsequent ‘thawing’ that Phillips notes during the Trump tenure allowed the Russian markets to breathe unencumbered by fears of sanctions.

How that will change in the years to come is abundantly uncertain. In addition to the inherent volatility of the Russian market that Phillips notes toward the end of the article, we saw just last night a range of policy positions from Democratic presidential contenders, some of them suggesting that it’s well past time to get back to brinksmanship with the former Soviet Union.

Until then, though, it may be that Russia ends up dominating in stock market increases, as well as geopolitical influence, where the Russian oligarchy seems to enjoy a pretty prominent position in domestic American politics.

“Across the board,” Phillips writes, “analysts are lifting their expectations for Russian companies’ profits this year, and some of those companies churn out rich dividends to shareholders. (The dividend yield of the MSCI Russia index is three times as high as the S&P 500 index.) Russia’s relative isolation from the trade war between the United States and China is another selling point.”

To be sure, the conclusion of the piece notes what many economists have found to be true over time – negative surprises abound in Russian markets, partly as the giant eastern nation drags behind the West in terms of key modernizations. So take any outlook on Russian markets with a grain of salt.