Russian President Vladimir Putin remains as bellicose and unconcerned about world opinion as ever, prompting many observers to compare the Russian dictator to…you know who.

By invading Ukraine and launching the largest land war in Europe since World War II, Putin has sent an entire flock of “black swans” into the investment skies. And despite continued setbacks for his military machine and accusations of civilian atrocities, Putin’s intention to crush Ukraine has not wavered. Below, I discuss what it all means for your portfolio.

Putin’s latest move of enormous consequence to the European economy (and global investors) is the termination of natural gas flows to Europe through the Nord Stream 1 pipeline, in response to Western sanctions.

The fox, the wolf, and the strongman…

Putin this week suggested that he’s perfectly willing to let Europeans freeze to death this winter. That’s bad news for the global economy (but paradoxically, good news on the inflation front).

Putin on Wednesday cited a Russian fairy tale in which a fox lets a wolf’s tail freeze, suggesting that Russia will completely cut off energy supplies to Europe if European governments go through with proposed price caps on Russian crude oil.

“We will not supply anything outside the contracts. We will not do anything that they try to force us to do,” Putin said at the Eastern Economic Forum. “The only thing we can do is to keep on saying the line from a well-known Russian fairytale: Freeze, freeze, the wolf’s tail!”

Europe, of course, is heavily dependent on Russia for natural gas. For the past several years, the Continent’s democratic leaders figured that by doing business with Putin and buying copious amounts of his oil and gas, they could “Westernize” the strongman. They figured wrong.

Europe now finds itself in a predicament of its own making and it’s desperately trying to tap sources of energy that are alternatives to Russia.

As gas inventories run low, Europeans are worrying about a protracted economic slowdown. With winter approaching, they’re also worried about shivering in the dark.

It’s encouraging, then, that both the German and French governments announced this week that emergency stocks of natural gas are exceeding goals and should be enough to avert catastrophe.

Geopolitical and monetary policy headwinds…

You should expect continued stock market volatility in the coming months, as geopolitics keeps investors on edge. Monetary policy is worrying investors as well, but less so lately. Economic headwinds overseas are easing fears of runaway inflation and ultra-hawkish rate hikes.

Read This Story: Goldilocks and The Three…Bulls?

The major U.S. stock market indices snapped their losing streak Wednesday and closed sharply higher, as investors started to lose some of their Federal Reserve jitters.

U.S. economic growth has been solid but not too hot, a balance that indicates the Fed might get less hawkish in 2023, although the betting currently calls for a rate hike this month of 75 basis points. In pre-market futures contracts Thursday, stock were trading higher as gloom over the Fed continued to lift.

OPEC+ this week agreed to a slight production cut, to help shore up falling crude oil prices. The recent drop in oil prices suggests weakening demand, which in turn is good news for inflation fighters (see chart).

The prices for other key commodities, such as natural gas, copper, and iron ore, continue their downward trajectory. Weighing on commodity prices are strict COVID-induced lockdowns in China and recessionary pressures in Europe.

At the same time, the U.S. dollar has been soaring in value compared to other major currencies, as investors flock to traditional safe havens. A strong greenback boosts the cost for countries to buy oil and hence crimps demand.

Some pundits are arguing that Western sanctions against Russia have been ineffective. That’s simply not true. International sanctions and voluntary business exits have exerted a devastating effect on the Russian economy.

Inflation in some sectors of the Russian economy is running at 40% to 60%. Consumer spending and retail sales have plunged about 20% year over year. Putin’s much-vaunted foreign exchange reserves are evaporating and the overall economy is forecast to contract by 6% this year.

To be sure, a contraction of 6% isn’t the collapse initially predicted, but the long-term damage to Russia’s economy will be even worse, in the form of foreign firm departures, the lasting loss of oil and gas markets, and restricted access to critical Western technologies. Meanwhile, Kremlin-linked oligarchs are being forced to forfeit assets.

As an investor, maybe you’re confused by all this geopolitical turmoil. Where can you turn for clarity, to make the right investment decisions?

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John Persinos is the editorial director of Investing Daily.

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