Timely Update: Ukraine and The Fed

Timely Update: Ukraine and The Fed

February 24, 2022
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First and foremost, my heart, thoughts, and prayers go out to all the families impacted by the Russian invasion of Ukraine. 

As we consider all that's going on right now and its impact on the markets, a Korean folk saying seems apt:

"When whales fight, the shrimp's back is broken."

The idea is that bystanders get hurt when big folks duke it out.

Let's discuss...

Russia launched a series of coordinated attacks on Ukraine, causing increased volatility in global markets and raising investor concern.

Map flag of Ukraine

Early last week, we saw the U.S. close the embassy in Kyiv and warned of a dramatic buildup of Russian forces on the border with Ukraine.

Although it was initially unclear whether Russia would be willing to diplomatically resolve security concerns about Ukraine joining NATO, on February 23rd, Russia launched a series of coordinated attacks on key military targets across Ukraine, including air, ground, and amphibious assaults.

While Russia is a strategic geopolitical player, its market presence and influence over global economic growth are limited. 

Based on other tragic humanitarian occurrences throughout history, events like this do not often have a lasting effect on global economies and market prices. 

For that reason, among others, Russia's recent actions do not change my investment outlook. 

However, I expect it to add a lot of volatility to markets as investors digest the latest news and information.

I will continue to monitor the situation closely for further developments.

For more details, check out this writeup from one of my new partners, Austin Pearl (LINK HERE)

The Federal Reserve may aggressively raise interest rates to fight inflation.

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With inflation at historic highs, some Fed officials worry that the central bank's credibility — AKA, their ability to manage inflation and employment — is on the line.

Rate hikes are coming in 2022, but how many and how quickly? That's up for debate by the Federal Open Market Committee next month.

Fed "hawks" want to raise rates quickly to bring inflation under control and increase consumer confidence and trust.

Fed "doves" want to carefully raise rates and watch the data to avoid damaging growth or spooking markets.

These are big decisions with big consequences for us, the economy, and the markets.

While FOMC meetings are often dry affairs, the next one looks to have as much drama as an episode of Succession.

We'll stay tuned.

Bottom line: there are many factors driving market movements, so we can expect to see plenty of volatility in the coming weeks.

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Given the Fed and geopolitical tensions at play, a correction would not be surprising.

What can we do when facing major events we can't control?

Take a deep breath, be grateful for all the good in our lives, and focus on our strategy.

(And drop me a note with questions or concerns.)

Let's hope for speedy resolution and clarity in the weeks to come.

Be well,

-Carlos

https://www.cnbc.com/2022/02/13/stock-market-futures-open-to-close-news.html

https://www.bbc.com/news/world-europe-60379833

https://www.theguardian.com/world/2022/feb/24/war-ukraine-kyiv-map-where-has-russia-attacked

https://www.cnbc.com/2022/02/14/bullard-say-the-fed-needs-to-front-load-tightening-because-inflation-is-possibly-accelerating.html