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THIS WEEK'S UPDATE

| March 01, 2022
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THE WEEK ON WALL STREET+

Investors rode a rollercoaster of emotions as rising hostilities at the Russian-

Ukrainian border sent stocks sharply lower before a powerful late-week rally erased

early losses.   The Dow Jones Industrial Average was flat (-0.06%), while the

Standard & Poor’s 500 edged higher by 0.82%. The Nasdaq Composite index gained

1.08% for the week. The MSCI EAFE index, which tracks developed overseas stock

markets, lost an eye-catching 5.72%.

 
GEOPOLITICAL EVENTS

The build-up to Russia’s eventual invasion of Ukraine triggered elevated market

volatility, resulting in broad-based selling that sent the S&P 500 into correction

territory as the holiday-shortened week of trading began. The sell-off culminated on

Thursday morning following the overnight incursion of Russian troops into

Ukrainian territory, though markets staged a powerful late-day recovery that

coincided with President Biden’s announcing fresh sanctions against Russia. The

afternoon rebound was remarkable, as the S&P 500 ended 1.5% higher after being

down more than 2.6%, while the Nasdaq Composite closed 3.3% higher after

dropping nearly 3.5% intraday. Thursday afternoon’s momentum continued into

Friday as stocks rallied to end the week in positive territory.

 
INVASION IMPLICATIONS

Setting aside the more important aspects of the human cost and damage to world

order, Russia’s invasion of Ukraine introduced an acute layer of uncertainty into

many layers of the financial markets. The immediate repercussion was the impact

on global economic recovery due to rising energy prices, which reduce consumers’

discretionary spending and saddle businesses with higher costs.  The inflationary

impact of higher energy and other prices, along with the prospect of decelerating

economic growth, also complicates the Fed’s strategy to guide interest rates higher.

Already, the probability of a 50 basis point interest rate hike at the Fed’s March 2022

meeting seems less likely than it was just a week ago. Finally, Russia’s actions have

raised new concerns over second-order effects that could further unsettle markets,

such as a new round of supply-chain disruptions.

 
THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: ISM (Institute for Supply Management) Manufacturing Index. 

Wednesday: ADP (Automated Data Processing) Employment Report.

Thursday: Factory Orders. Jobless Claims. ISM (Institute for Supply Management)

Services Index.

Friday: Employment Situation.

 
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS

Monday: Lucid Group, Inc. (LCID), Zoom Video Communications, Inc. (ZM).

Tuesday: Salesforce.com, Inc. (CRM), Target Corporation (TGT), Ross Stores, Inc.

(ROST).

Wednesday: Dollar Tree, Inc. (DLTR), Snowflake, Inc. (SNOW).

Thursday: Broadcom, Inc. (AVGO), Costco Wholesale Corporation (COST), Best

Buy Co., Inc. (BBY), Marvell Technology, Inc. (MRVL), The Kroger Company (KR).

 
FINAL THOUGHTS

The situation with Russia and Ukraine is certainly unnerving and lots of rhetoric

gets tossed around in times like these.  I find it is best to control what you can

control.  As investors, this is typically our attitude and behavior.  We must keep in

mind that while economic sanctions against Russia could spill over into other areas

in the short-term, the U.S. economy is still strong and we don't depend on Russia

and Ukraine for much of our GDP.   Sure, the thought of any war and the worst case

scenario repercussions are always scary.  Most of the time, the worst case scenario

doesn't play out and we are left having done a lot of mental gymnastics for no reason.


A lot of bad news has been priced in.  War, high inflation, rising interest rates

and political jockeying is the news du jour.  It may just turn out the worst of all these

situations do not become reality.  Keep in mind a little more than eighty years ago

the scenes of families and neighbors huddling in Subway cars to avoid aerial attacks

and rockets were not occurring in Kyiv and Kharkiv but in London, England.

However, the market bottomed in June 1940 before the Blitz began. British stock

markets were able to go up through all those military defeats and the ruinous

bombing of their urban centers.


 This too, shall pass. Have a good week.



 

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