Russia Invades Ukraine and The S&P 500 INCREASES 1.5%
The invasion of a country has historically been seen as a bearish event for markets.
But in today’s market?
It hardly fazed the S&P 500 as it INCREASED 1.5% by the end of the trading day.
“Just buy the dip, bros!”
At least that seemed to be the rallying cry as investors piled into the market’s early dip at the market open.
Most of the time when a catastrophic event like this has happened (like, ummm, the bombing of the World Trade Center on 9/11), the markets have dropped severely.
Similar to flying a flag at half mast to show some respect, markets have usually lowered …as if to mirror the unfortunate events that have taken place. It’s been their own unique way of acknowledging and offering their condolences for what has happened.
But not today.
President Vladimir Putin stated that Russia does not want to “occupy” its neighbor as armed forces invaded with missile and artillery fire, but that action was required after the United States and its allies violated Russia’s “red line” by extending NATO.
US President Joe Biden reacted Thursday by imposing new sanctions and promising to deliver more strategic oil if situations allow.
According to Ryan Detrick, chief market strategist at LPL Financial, the Russian invasion of Ukraine has exacerbated an already stressful year. He added that it’s crucial to remember that in the past, large geopolitical crises were typically short-term market difficulties, especially if the economy was stable.
Previous gains of up to nine percent were curtailed in West Texas Intermediate crude, falling to about 1% by the end of the trading day. A 1.96 percent decline was seen in the yield on the 10-year Treasury note. Earlier advances in gold were reversed. The dollar and yen soared, while the euro and other commodity-linked currencies fell.
Due to Russia’s continued status as a commodities superpower and Ukraine’s prominence as a major grain exporter, the war poses a danger to global raw material and food prices. Earlier in the day, natural gas prices in Europe surged by as much as 62%, while metals saw a rise, adding to inflationary pressures already present in the market.
Globalt Investments portfolio manager Keith Buchanan mentioned that Central banks throughout the world have really taken a concentrated effort to tamp down inflation without considerable disruption or without the risk of monetary policy blunders, before adding that when inflation pressures rise at the same time that economic growth declines, it’s always a cause for concern.
It’s clear that rising prices and tighter monetary policy are going to make things more difficult for the global recovery. Inflationary expectations are rising in the money markets. At their highest point in the period tracked by Bloomberg since the company began accumulating data in 2004, two-year breakeven rates for US Treasury inflation-protected securities are now at their highest point in that period.
Global markets strategist Ben Laidler feels this is a triple-hit the global economy, with a poisonous mix of increased inflation, weaker growth and greater uncertainty. The one good thing according to Laidler is that economic growth is strong, which serves as a cushion against any downturn, and institutions and investors have already prepared for high inflation.
Even as the Federal Reserve continues to raise interest rates, investors remain concerned about the impact on growth in the world’s largest economy. U.S. interest rates are likely to rise again this year, according to Loretta Mester, president of the Cleveland Fed, and Raphael Bostic, the president and CEO of the Atlanta Fed. However, prior to the war on Ukraine, market expectations were for six quarter-point rises by the Fed this year.
In after hours trading at the time of this writing, the S&P 500 has dropped marginally – about 0.29%.
At least in after hours trading the S&P is finally showing a little respect for what’s happening overseas.
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