THE WEEK ON WALL STREET
War in Ukraine weighed on stocks as investors assessed the economic impact of
continued hostilities, expanding economic sanctions, and potentially higher
inflation due to rising oil prices and new stresses on the global supply chain. The
Dow Jones Industrial Average fell 1.30%, while the Standard & Poor’s 500 lost 1.27%.
The Nasdaq Composite index slid 2.78% for the week. The MSCI EAFE index,
which tracks developed overseas stock markets, dropped 3.21%.
ANOTHER VOLATILE WEEK
The uncertainty introduced from Russia’s invasion continued to whipsaw the
financial markets last week. Intensifying hostilities early in the week sent stocks
sharply lower as oil prices surged and a flight to safety drove investors to buy
bonds. Stocks rebounded mid-week following the release of positive economic data
and Congressional testimony by Fed Chair Jerome Powell, who said the Fed is likely
to move forward on rate hikes, but would proceed cautiously. Investor enthusiasm
was short-lived, however, as stocks resumed their decline on Thursday into Friday
despite a strong employment report.
POWELL TESTIFIES
Fed Chair Powell told Congress on Wednesday that he would propose a 25 basis
point increase in the federal funds rate when the Federal Open Market Committee
meets in mid-March. He conceded that the invasion of Ukraine and the economic
sanctions against Russia introduced a level of uncertainty and that the Fed would
proceed carefully with monetary tightening. Powell also testified that he would not
have the Fed’s strategy to shrink its balance sheet finalized before the mid-March
meeting. Alluding to the urgency of fighting inflation, Powell left the door open to
more aggressive rate hikes later in the year.
THE WEEK AHEAD: KEY ECONOMIC DATA
Wednesday: JOLTS (Job Openings and Labor Turnover Survey)
Thursday: Consumer Price Index. Jobless Claims.
Friday: Consumer Sentiment.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: Guidewire Software, Inc. (GWRE).
Wednesday: Asana, Inc. (ASAN).
Thursday: JD.com, Inc. (JD), Ulta Beauty, Inc. (ULTA), DocuSign (DOCU), Rivian
Automotive, Inc. (RIVN).
FINAL THOUGHTS
Make no mistake, the invasion of Ukraine is a travesty, but beware the negative
sentiment the news media is pushing. Remember your longer-term goals and if they
have changed, let us know. If not, don’t let the current market correction shake
you. I expect the market will retest the lows of February 24th. I can’t tell you the
outcome of that test, but bottoming is a process and takes time.
Most of the following appeared in last week’s update, but it is worth repeating.
Market’s do not bottom on good news and 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 8 months of ruinous bombing of their
urban centers.
And remember, this too, shall pass. Have a good week.
