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?
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.
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 –
- Fed “hawks” want to raise rates quickly to try 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 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.
Your RINA Wealth Management Services Team
Footnotes and Disclaimer
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