What does a US sanction on Russia cause?

It is unclear about if there will be a further US sanction on Russia and if there is, what the sanction will be. It is almost certain that the US government will not be as harsh as it may have sounded as it is possible that the US government may not place a further sanction on Russia. The public wants to know what a US sanction on Russia means to ordinary people. In general, a sanction will not affect most of the ordinary people unless if they live in Russia or do businesses with Russians. However, such sanction could influence the global financial market, which might affect many people’s investment in assets and their pension funds.

Russia is a country that exports natural resources to the world. After the US government softens on the sanction issue, the price for aluminium drops significantly, this is the same for other types of natural resources including crude oil as well. This will push up the stock prices of the companies which demand these natural resources as raw materials for production but drag down the prices for companies that mine these natural resources or provide alternative solutions (such as solar companies). In addition, sanctions on Russia, this kind of powerful nations, would raise the world concern about the tensions between superpowers. This could increase the price of the US Treasury Bills. The concerns surrounding the trade war between China and the US have raised the worries of the investors worldwide, this increases the demand for secured assets such like the US government bonds, so the bond price will increase and the yield will fall; the stock market performance is inversely correlated with the US bond price. When the tension between the US and Russia is relieved, this will lower the bond price and increase the bond yield. The US bond yield has hit nearly 4-year high, this shows the financial market has not been very cautious about the consequence of the trade war between the US and China.

To conclude, if the US does not place a sanction on Russia, in the short term, it definitely is good news for the world financial market in general, as it relieves the tension between the US and Russia and lowers the probability of conflicts between these two powerful countries in the short term. However, given the ongoing trade war between China and the US and the yield hits 4-year high, I think it is possible that the US bond is undervalued.