Expect a Holding Pattern

With Presidential and Duma elections set to take place in the coming year. Expect calm, certainty, confusion, and nervousness. A little confused yourself, let me explain. Firstly, Putin will definitely be leaving office on time and handpick his successor. He has the power over the media, money, legal establishment, and political power to get a jar of caviar elected if he wanted to. There will be some moderate inflation growth to be expected from growth in income, government spending, extra costs to consumers and businesses for the lessening of government subsidies for energy. All the things you would come to expect from a growing economy with some extra things added in that make Russia, well, Russia. All which brings us to the phrase “perception is reality” and in the case of financial markets this is usually the case in the short term. You will start to hear things from the mainstream media such as “will Putin really leave on time” (yes), “will a surprise candidate appear that nobody expects” (probably not), and “will the new policies be radically different” (no). There is a very good chance the markets will punish Russia in the short term for the perceived uncertainty, both in the fixed income and equity markets. We view these as buying opportunities. A chance to selectively buy quality issues unfairly beaten down. Of course, with all elections there will be winners and losers and we invite you to check here and our main web page for the latest, including are odds on favorite to win the race!