Market Update

Despite the intensification of events instigated by Russian President Vladimir Putin, we believe that most of the negative outcomes have been factored into the financial markets. On Friday, markets exhibited a notable upswing.
Throughout the week, as Russian forces entered Ukraine and Putin hinted at potential nuclear engagement, the West responded with punitive measures. Notably, some Russian banks have been barred from the SWIFT system, crucial for global financial transactions. These sanctions are bearing fruit with the Ruble's value tanking and Russians rushing to ATMs. To cushion the economic blow, Russia delayed its market opening by three hours today, and the Bank of Russia astonishingly hiked interest rates from 10.5% to 20% to guard against the impacts of the West's sanctions.
Though Putin's nuclear rhetoric is concerning, it seems more like a smokescreen, and signals of a leader grappling for control. The invasion has unified global responses, with countries like the U.S. pledging significant support to Ukraine.
While the current crisis is deeply unsettling on a humanitarian front, in terms of global economics, its impact might be limited. Yes, rising commodity prices, especially oil and gas, will feed inflation. But central banks, cognizant of the resulting consumer strain, may reconsider aggressive rate hikes, which would benefit the broader economy and equity markets. We contend that the markets have been overly pessimistic about rate hike prospects, and any deviation from expected aggressive rate increases could spur a market rally.
Market volatility is natural during periods of uncertainty, such as the present situation in Ukraine. Though unnerving, history tells us that markets weather such storms. For perspective, the S&P 500 plunged by 34% in early 2020 due to the COVID-19 pandemic but rebounded within six months.
While European markets opened lower today and U.S. futures are down, a significant portion of this volatility might already be baked into current market valuations.
Though short-term market jitters are anticipated, it's crucial to stay the course. Historically, long-term equity prospects have remained bright even amidst volatility, presenting valuable opportunities for well-positioned global companies.