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Russia-Ukraine Tensions Could Send U.S. Stocks Down By 20%, RBC Says

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Should Russia invade Ukraine, the stock market in the U.S. could have the grimmest days since the two Iraq wars, according to analysts of the Royal Bank of Canada. The financial institution also asserts that investors do not seem to fully understand the impact of a threat.


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A New Big Drop

As reported by Markets Insider, a 20% stock decline could take place amid a Russia-Ukraine conflict. The impact would be similar to the S&P 500 drop of 19.9% in the onset of the 1991 Iraq war, as well as the 12.8% stock plunge during the U.S.-China trade tug.

RBC Capital Markets analysts said the impact might not be the same, but the fall could be compared to previous events.

“It is useful to remember that the two Iraq wars were associated with peak-to-trough stock-market declines that resemble growth scares and recessions. Both drops occurred ahead of the actual conflict when tensions were building.”

Chief strategist Lori Calvasina and her team of analysts said that the high probability of U.S. sanctions on Russia could be compared with the China trade war of 2018. However, China is a greater trading partner for the U.S. than Russia.


RBC also asserts that “Geopolitical risk emanating from Russia/Ukraine is not priced into the US equity market, should conditions worsen, and will be a key issue to watch in the weeks and months ahead.”

As the threat of an invasion mounts and Russia circles Ukraine with more than 100,000 troops, the S&P500 dived by over 8% on Thursday. The markets will also be likely hammered by talks of an anticipated rate hike by the Federal Reserve.

Meanwhile, “Investors are particularly worried that a war involving Russia, a major energy supplier, could push red-hot inflation even higher.”

According to Fox Business, the price of gold soared to the highest in nine months as the geopolitical tension in the region increased.

“There is a lot of government data around inflation. Inflation is definitely there, and the way we are dealing with it —we are not dealing with negative interest rates, which is the only way you can stop inflation, all good for gold,” said Barrick Gold president and CEO Mark Bristow.