The Bank of Russia just issued a surprise announcement sure to elevate volatility in world markets. Bloomberg reports, just after midnight on Tuesday, the Russian central bank hiked interest rates to 17% from 10.5%. The 62% increase is the most extreme move made by the bank since rates rose above 100% during Russia’s last currency crisis in 1998. The government defaulted on its debt at that time.

The Russian currency—the ruble—has lost almost half its value against the U.S. dollar this year (-49% to date). The slide began after Russia intervened in neighboring Ukraine. The West imposed trade sanctions after the incident. Russia managed to cope with the sanctions… but OPEC’s recent decision against curbing a worldwide oil glut has sent crude prices plummeting. Cheap oil and gas have collapsed Russia’s revenues… and some speculate the country is now selling off its gold reserves. The turmoil has caused investors to flee the ruble, worldwide.

Gold, oil, and the ruble’s fall have pummeled the Russian bear. And as any naturalist can tell you… wounded animals are the most dangerous. Especially when the “animal” controls 8,500 nuclear weapons. This is an unstable situation that will continue to agitate international markets. Expect elevated volatility to remain.

Bottom line: The latest Russian episode is a prime reason why we say the most important factor in your long-term wealth preservation and growth is appropriate asset allocation. When assets like gold and oil fall, assets like the dollar rise to account for it. And if an event spooks equity markets, other markets, like U.S. real estate, are less affected. Being over allocated to just one or two asset classes (like most Americans are) is high-risk. Reduce your risk by spreading your wealth out over several different classes. And look for our new asset allocation models, coming out in the new year.