Joshua Rodriguez writes: Over the recent past, we’ve watched as tensions escalated between Russia and the Ukraine. As tensions rose, we watched stocks plummet. However, the day was saved Tuesday as tensions between the Ukraine and Russia finally eased. Tuesday brought great news for investors as the DOW soared 228 points or 1.4%. That’s the biggest gain the DOW has seen all year! The DOW wasn’t the only market to enjoy the frenzy either. Nasdaq had a gain of almost 1.8% while S&P 500 hit record highs.

The Russia/Ukraine Conflict Story

On Monday, Russian troops moved into a strategic position at the Crimea Peninsula in Ukraine. Doing so raised tensions and showed a true threat of military conflict. Because of the fear of military conflict, stocks plummeted!

Tuesday, Russian President Vladimir Putin stated that he and his country have no plans of taking over the region. However, he did state that Moscow reserves the right to use military force in order to protect Russian speakers in foreign nations including Ukraine.

Is The Issue Over?

No, as a matter of fact, it’s far from it! Although investors seemed to be happy with what Putin had to say, the situation in the Ukraine is still highly volatile. The White House is still considering sanctions against Russia as President Obama and Secretary of State Kerry dished out criticism of Putin’s actions Tuesday.

Nonetheless, there’s been a Market Shift

On Monday, we watched as investors bailed out of traditional stocks for investments considered safe havens like gold. However, Tuesday, we saw a complete tidal shift. Instead of flocking to safe haven investments like Gold, investors bailed out on the gold and flocked back to the DOW, Nasdaq, S&P 500, bonds and more. We’ve already talked about how well the DOW, Nasdaq, and S&P 500 exchanges are doing, but we haven’t talked about gold and bonds. Gold prices fell 1% Tuesday as a result of the tidal shift, and the yield on 10-year U.S. Treasury Bond rose to 2.69%.

If The Issue Isn’t Over, Why Are We Seeing The Market Shift?

Russia has stated that they are not interested in taking over the region. However, the United States is not happy with their statement, and the White House is still considering sanctions on Russia. So, why is there so much trust in the market? Why aren’t people as afraid of the risks?

In my humble opinion, it has quite a bit to do with the politics of the situation. Europe is happy with the fact that Russia is not planning a regional takeover. Quite a bit of this happiness is backed by strong economic ties between Europe and Russia. If sanctions are imposed, Europe’s economy would lose billions of dollars in import/export revenue. With such strong ties Europe would never want sanctions imposed on Russia as freezing Russian assets could devastate the European economy.

Knowing the economic ties between Russia and Europe, and the political ties between the United States and Europe, investors are banking on the fact that sanctions most likely will not be imposed. These economic and political relationships seem to be building a safety net for investors.

Can Sanctions Still Happen?

Of course they can, in the worlds of finance and politics, anything can happen. That’s what makes the topics so enjoyable to follow. I think for sanctions to happen, the United States is going to have to hard sell Europe and other nations on the idea. Although it’s still possible, it’s not something that I say has a strong chance of happening considering worldwide political and economic climates.

Final Thoughts

It’s amazing how fast things have been unfolding this week. Monday, we saw stock markets tumble as gold soared, and now Tuesday, we see the exact opposite. The reality is, I can’t tell you what’s going to happen in the days and weeks to come. What I can tell you is that this is definitely going to be one to watch.

Author’s Bio:
Joshua Rodriguez is a personal finance writer for Settlements.org. To connect with Joshua, follow him on Google+!

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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