Invest in MATCO Funds Today

The name Molotov Cocktail was coined by the Finns in 1939 during the Winter War when Russian aircraft bombed Finland. Soviet foreign minister Vyacheslav Molotov would announce on Soviet radio that those bombing missions were humanitarian food deliveries for their starving neighbours. The Finns developed the handheld firebombs and threw them at Russian tanks as they rolled down the street. The Finns called it the Molotov Cocktail to go with the “food parcels” being delivered.

Russia’s current unprovoked attack on Ukraine has set the world ablaze. As the Russian invasion moves into the next stage, the West fights back with an economic war through sanctions to cripple the Russian economy. Whether a military war can be stopped by an economic war remains to be seen. Although the Russian economy, currency, and stocks are in free fall this has not stopped the war. (Note: since Monday the Russian stock market has been closed but select Russian stocks continue to trade on the U.S. exchange)

President Putin’s strategy so far has been based on two major assumptions:

  1. NATO military forces would not get involved to defend Ukraine.

    • First, since there is no public support by Americans, or Europeans to risk their lives and get involved in another long war.

    • Second, NATO would not want to risk a larger escalation of the war with a superpower, such as Russia.

  2. Europe would not stop imports of Russian oil and gas and if they did prices would skyrocket potentially leading to a European and American recession.

    • Russia is the second-largest exporter of oil with approximately five million barrels per day. Approximately 60% of oil exports go to Europe and 20% to China. Note: Russia represents 34% of oil imports for Europe.

    • With 41% of European natural gas coming from Russia, a gas ban would cause natural gas prices in Europe to increase substantially, either causing a recession or forcing governments to provide massive subsidies to consumers and businesses, which would cause significant deficit spending.

As expected, the West is genuinely concerned about oil prices since historically, when the oil price has doubled year-over-year, it has led to a U.S. recession (see chart below). With oil prices now over US$100, on Tuesday the International Energy Agency (IEA) announced a plan to release sixty million barrels of oil from global reserves to counter the high price. This represents 4% of the 1.5 billion barrels in reserve and only accounts for 12 days of Russian oil exports, thus it's unlikely to cause the oil price to decline significantly.

A Sharp Spike in Oil Often Leads to a Recession                                                               

Source: Alpine Macro

The Bottom Line
We expect stock markets to remain volatile as the war moves through various stages. However, we do not believe an oil price-led recession is going to happen. We believe a combination of the excess IEA global reserves available and select OPEC members’ ability to increase production should be able to tame oil prices from significantly damaging Western economies.

What if we are wrong and oil prices lead to a recession? The global central banks will use the same playbook that they used during the 2008-2009 Great Recession and the 2020 COVID Recession. Central bankers will restart quantitative easing (buying bonds and other financial assets) and cut interest rates back to zero again. National deficits and debt will balloon again, as they did the last two years, but this is a better option than another recession.

The Matco Global Equity Fund does not own any Russian stocks directly. Indirectly it has a less than 0.4% weight to Russian stocks through an iShares emerging markets index exchange-traded fund (ETF). However, on March 9th this ETF will be moving its exposure to Russian stocks to zero.

Matco continues to remain focused on owning high-quality dividend-paying companies and is watching the Ukrainian developments closely.

Our hopes and prayers are with the Ukrainian people.


Click here to email Anil Buy our MATCO Funds today

Anil Tahiliani, MBA, CFA
Senior Portfolio Manager, Canadian Equities
Local: +1-403-718-2130

Download PDF 


Founded in 2006 to manage and service seven family offices, today Matco offers the benefits of our extensive investment management experience to individual investors, foundations, endowments, condominium corporations, trusts, corporations and not-for-profit organizations.

Our mission is to simplify the investment world for our clients by understanding their needs and providing exceptional investment solutions that preserve and grow capital.

 Matco Financial is an independent, privately held discretionary investment counsellor and asset management firm that serves the needs of individual investors, institutions, advisors, trusts, corporations and not-for-profit organizations. Matco provides investment advisory services to investors on a discretionary basis through mutual funds and separately managed accounts. This communication is intended for information purposes only and does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Matco Financial Inc. makes no representations as to the accuracy or any other aspect of information contained in other websites. All statements that look forward in time or include anything other than historical information are subject to risks and uncertainties and are not guarantees of future performance. Investors should not rely on forward-looking statements. Actual results, actions or events, could differ materially from those set forth in the forward-looking statements.

For more information please visit
 MATCO Financial Inc. ©2022 All Rights Reserved.
Our mailing address is:
350, 440 – 2nd Ave SW,
Calgary, Alberta T2P 5E9
Phone: 403.539.5740