In Market Commentary

Update – War in Ukraine and Fed Watch

As we consider the tensions driving recent market movements, bystanders often get nervous or hurt when big folks duke it out.

What are the tensions? Who are the bystanders?

Let’s discuss.

An invasion of Ukraine is underway.

After months of buildup and posturing, Russian and Belarusian forces have launched strikes into Ukraine and have begun to invade on the ground. The U.S. has closed the embassy in Kyiv and previously warned of a dramatic buildup of Russian forces on the border with Ukraine.1

It’s unclear whether Russia intends to occupy Ukraine or is simply pushing back due to security concerns about Ukraine joining NATO.2

However, an actual expansive ground war between NATO and Russia would be extremely damaging, and (hopefully) unlikely at this point.

We’ve seen this before from Russia. The Republic of Georgia, the annexation of Crimea. That seesaw between high tension and relief is likely to add a lot of volatility to markets as investors digest the latest news. While markets will react, we’ve already seen some selling over the past few weeks attributed to this potential (now real) conflict.

Map of the Ukraine Region

What about the Fed?

The Federal Reserve (Fed) may aggressively raise interest rates to fight inflation.3

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. We see rate hikes coming in 2022, but how many and how quickly? That’s up for debate by the Federal Open Market Committee (FOMC) next month.

You’ll hear a lot of jargon coming out of these meetings. To help –

  1. Fed “hawks” want to raise rates quickly to try to bring inflation under control and increase consumer confidence and trust.
  2. 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 markets.

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

We’re watching. We’ll stay tuned.

Bottom line: there are a lot of factors driving markets, so we can expect to see plenty of volatility in the weeks to come.

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

What can we do when we’re facing major events we can’t control? Take a deep breath, remind ourselves that investing is about the longer term, and stay focused on the overall strategy and plan.

If you should have any questions or concerns, or want to discuss your particular situation, feel free to reach out to us anytime.

Let’s hope for peace and clarity in the weeks to come.

Our team is keeping a close watch and will reach out as needed.

Be well,

Your RINA Wealth Management Services Team

Footnotes and Disclaimer
1https://www.cnbc.com/2022/02/13/stock-market-futures-open-to-close-news.html
2https://www.bbc.com/news/world-europe-60379833
3https://www.cnbc.com/2022/02/14/bullard-say-the-fed-needs-to-front-load-tightening-because-inflation-is-possibly-accelerating.html

Risk Disclosure: 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. Past performance does not guarantee future results.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

Tom Neff
Tom is the Managing Partner of RINA Accountancy, LLP.
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Soldiers in front of Russian and Ukrainian flags