This too will pass (at least for markets); how soon and what the sanctions are going to be for Russia are the determining factors. Russian troops in Crimea and Russian leaning Ukrainians are dominating the situation currently. Russian Pres. Putin has made a major decision that the US and Europe won’t be able to come to agreements to implement sanctions against Russia sufficient to make the price of seizing Crimea and the planned aggression into Ukraine not worth it. Back in 2008 Putin took some of Georgia against strong protests in the US and nothing came of it; looks like he believes he can get away with intrusions of international borders again. Ukraine is broke, no money in its treasury and will need help or Putin will be even more emboldened.
Europe will feel pain with slowing natural gas that comes from Russia and Ukraine; trade between the EU and Ukraine could be jeopardized putting more pain on the EU Economy, much more so than here in the US. What confidence does Europe have that the US will actually play chicken with Putin? Ukraine borders four of America’s NATO allies, who are watching closely how the U.S. and the rest of Europe respond. Putin told the President on Saturday “In case of any further spread of violence to Eastern Ukraine and Crimea, Russia retains the right to protect its interests and the Russian-speaking population of those areas.” Putin has thrown down the gauntlet, energized by previous US failures to stand pat on threats like the Syrian issues. Lot of talk about what the US can do militarily; that is not likely, no matter what happens to Ukraine. The US and Europe have no strong appetite to get that deep into the crisis and Putin appears to be counting on it. He believes he can withstand any sanctions or threats frm the west, regardless of the pain on Russian people.
Today markets were in turmoil over what it all means. Europe’s stocks and US stocks took hits while the safety move into US treasuries has pushed rates lower—but not much given the present uncertainty. The small decline on the 10 yr note suggests there is not a lot of fear that the Ukrainian/Russia crisis will lead to any significant long term global economic Armageddon.