The Russia/Ukraine conflict.
There is no doubt that the conflict in Ukraine perpetuated by a belligerent and hostile Russia has upended the market. This is THE issue currently moving the markets and will continue to do so until a resolution is reached. The disruption to the global economy from coordinated sanctions on Russia is real and will linger. It is simply not possible to levy the amount, and severity, of sanctions on an economy the size of Russia without seeing ripple effects throughout the world.
This war will continue to cause issues for the supply chain, particularly in energy and foods. Ukraine and Russia are both major participants in the global energy and wheat/grain markets.
Unfortunately, this is a shock to the system that will continue to reverberate for some time, both economically and politically. With that being said, the impact of such a terrible geopolitical development does not mean that markets will remain stuck in reverse forever. Here is a piece assembled by the Vanguard Group that details historical geopolitical turmoil and the resulting market sell-offs.
Federal Reserve’s response.
Many people were surprised to see the markets rally back so strongly last week considering the outbreak of war in Ukraine. In my opinion, much of this can be attributed to traders adjusting expectations that the Federal Reserve may move more slowly than previously expected in their monetary tightening. While I do believe the Fed will take the developments into consideration, I do not believe that it will markedly change their original schedule for interest rate increases or other monetary tightening.
Market fluctuations and opportunity.
It is important to keep in mind that volatility in the stock market is a normal occurrence, regardless of the catalyst for its appearance. These moments of volatility often present a good opportunity to add to solid companies at lower prices. I continue to see that being the case in the current scenario. As always, if you ever have any questions or concerns, do not hesitate to reach out to schedule a phone call.