As brutal Russian attacks on civilian targets in Ukraine intensify, there seems very little hope that a ceasefire can be reached anytime soon.
But hints last week that there was some shifting of positions between Russia and Ukraine led some market watchers wonder if a so-called “relief rally” will follow – and, if so, what would it look like?
“While the Russian military has inflicted immeasurable human suffering on the people of Ukraine and caused a refugee crisis to cascade across the European continent, its actions have led it no closer to conquest than when it began,” Real Money Columnist Kevin Curran wrote recently. “As such, its leaders may have to reassess their goals and come to the negotiation table.”
Ukrainian President Volodomyr Zelenskyy has suggested Russia's increasing interest in doing so.
"Our delegation is in negotiations with the Russian Federation," he said on Wednesday. "It is important. It is difficult, but important, because any war ends in an agreement. Meetings continue. As I am told, the positions in the negotiations sound more realistic."
If any agreement or ceasefire were reached, the implications across energy, financials, and more would be vast. Amidst this opportunity, investors will also need to be nimble before Russia’s economy could crumble even more.
“Indicative of the status of the rapidly souring Russian economy, some major oligarchs are making allusions to the 1917 October revolution,” Curran said. “In this context, Russia appears to have only more to lose as fighting continues.”
With the war entering its second month, Ukraine looks no closer to raising a white flag than it did early in the conflict. Even beyond Ukraine's borders, NATO has been galvanized into action with a massive policy shift in Berlin and the Baltic states put on high alert.
The radically optimistic hope is that these pressures, both external and domestic, might possibly lead Vladimir Putin and his advisors to make more realistic demands for peace accords.
“In this scenario, energy stocks would be likely to fall back to earth while nearly every other sector would benefit,” Curran said. “This is particularly so for European stocks, which have been hardest hit by soaring prices at the pump and soaring inflationary pressures that exceed even red-hot U.S. figures, given fertilizer and raw material supply chain tamps.”
Consumer and commodity price declines would likely follow.
"If a deal were to materialize, it would certainly put downward pressure in the recent rallies we have seen in commodities," Mark Gibbens, CEO at Erudite Capital, told Real Money. "Obviously, gas prices, along with food and fertilizer should come down further from their current levels. Prices of goods such as neon and palladium, used in the production of semiconductors, would likely also come down."
Hard-eyed realists have a different take.
"This war is not going to end quickly and there is not going to be a peace deal - so a stock market rally is not going to happen," Bob Bilbruck, CEO at consultancy firm Captjur said. "In fact, we are predicting the reverse of a rally. We are predicting a long-drawn-out conflict that the Chinese will make worse by backing Putin."
For now, hope for peace negotiations is understandable. “But investors will need more than hope to place any bets on a relief rally at this time,” Curran said.
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