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Markets Have Down Week as War In Ukraine Enters Third Week
Key Takeaways
  • The S&P 500 closed at 4,204.31 down from 4,384.65 last Friday. The VIX closed at $31.00. There was supposed progress in talks this morning, at least Putin said so, but the rally petered out and the index closed near session lows.
  • The conflict in Ukraine continues to escalate and the humanitarian toll is mounting. Russia has retaliated against Western sanctions with export bans. The possibility of a Russian debt default is rising as well.
  • CPI came in at 7.9% this week without the effects of Russia’s invasion on commodities being taken into account yet. This likely means that inflation will peak later than anticipated prior to the conflict.
  • The breadth of commodities being affected by the current war is unprecedented in modern times. However, equity valuations are increasingly attractive and US equities have been a relative safe haven.

The Russo-Ukrainian War entered its third week and despite occasional glimmers of hope, events on the ground are increasingly grim. There is hope for resolution through peace talks, but Russian actions are increasingly alarming with regards to the use of indiscriminate bombardment. Also, today the Russians attacked a variety of targets in the West that had until now remained unscathed. The events are harrowing and our prayers are with all those affected by this war. Unfortunately, the longer this war goes on the more people it will effect given the centrality of Russia, Ukraine and Belarus’s role in the global commodities supply chain. The breadth of commodities affected is stunning. From energy, to food and fertilizer and to some metals necessary for clean energy the potential impact of a prolonged economic siege of Russia is prodigious. Stocks of many commodities were already low from elevated demand for goods versus during the pandemic.

This particular geopolitical event is creating a lot of uncertainty for good reason. Markets are making huge intraday swings since the conflict began and the prices of everything from natural gas to sunflower oil have skyrocketed. Broad commodity indexes are getting to levels not seen in decades. The level of the VIX doesn’t tell the entire story. The JPM Global FX Volatility is at its highest level since March 2020. Bonds stocks and even cash are all reeling in the face of the implications of the invasions and economic isolation of Russia and Ukraine.

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