AE Wealth Management: Market Minute Blog | 2/24/22
The Impact of Russia/Ukraine Conflict on U.S. Markets
After weeks of building tension, Russia has launched an offensive operation in Ukraine. Putin set the stage by announcing the “independence” of two rebel-held areas in Ukraine, then declared he would defend their independence against Ukrainian aggression.
The declaration was merely a pretext for Russia’s wider foray into Ukraine. Dozens of Ukrainians have been killed so far, and Putin’s ultimate goal may be to take the entire country.
The U.S. stock market sold off immediately on the morning of Feb. 24, with the Dow down over 800 points and the S&P 500 shedding over 100 points. One major concern is that Russia accounts for about 10% of world oil exports, and any disruptions will impact the price of oil. (Even the mere threat of disruption has already had an effect.) The invasion has already pushed the price of oil to $100 per barrel.
The big question now is where – and when – will Russia’s incursion stop? Will they take all of Ukraine? Part of it? Will they go further and expand the conflict to the neighboring Baltic republics? This will be the least likely and most dangerous scenario, since the Baltic republics and Poland are NATO members and we would be obligated to come to their aid.
Markets closed in the green after a day of uncertainty but we can likely expect continued volatility in the short-term. Inflation remains a top concern; rising energy prices mean inflation will likely continue to rise, but President Joe Biden has committed to limiting the fallout for energy prices. The Federal Reserve will likely be forced to act as a result and any action on their part could put further pressure on the markets.
It’s our hope that this invasion – and the market’s reaction – will be short-lived. Markets will calm and come back, but it may be a rough ride until they do. Our recommendation for investors is to stick to their plan and avoid making decisions could be driven by emotion, as those can be detrimental to portfolios.
02/24 – 2053475 This is provided for informational purposes. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. None of the information contained herein shall constitute an offer to sell or solicit any offer to buy a security.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.