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Geopolitical Risk (Russia, Crimea, Ukraine)

RUSSIAOne of the biggest risk factors facing a truly global market is the prospect of armed conflict in regions of the world where stability once reigned.

Now, it’s one thing to have ongoing conflict in hotspots such as Afghanistan, Iraq or Syria, where such outbursts are expected. But it’s another thing to have a new conflict erupt in the Ukraine, a nation ensconced near NATO borders.

The annexing of Crimea by Russia, and the potential for more incursions by the former Soviet Union into Ukraine and beyond, is something perched in the backs of nearly all global traders’ minds.

So far, the effect on the financial market from the Russian action has been relatively subdued, although risk assets such as gold — via the SPDR Gold Shares (GLD) — did experience a price spike as troops rolled into Crimea.

If tensions escalate from here, or if other nations such as Iran decide to gin up tensions in their sphere of influence, look for stocks to react violently in response.

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