It happened: Overnight Russian Military Entered Ukraine
I did not see this one coming. What level of chess is Putin playing? Does anyone really know what makes this man tick? It appears we are about to find out how far his ambitions go.
The overnight raid targeted military infrastructure and moved troops throughout the country. Global stocks initially reacted poorly but have since recovered nicely. Maybe investors were uncertain to the US response (i.e. expected the worse with a declaration of war?) or market participants are thinking the easy money train will live on for longer.
So far the West's response has been sanctions. There have been reports that Russia is having trouble selling oil to certain customers because Western Banks will not provide a letter of credit.
While the broad markets will need to figure out how this conflict will impact the future, we are already seeing oil prices and other commodities spiking. This supply side price increase will keep inflation at elevated levels if not drive them higher.
Markets may be pricing in a FED policy change but the Federal Reserve will probably at least start hiking rates to look like they are strong against inflation before pivoting back to trying to support economic growth.
If the Russian attack is short lived like Crimea invasion, markets will likely continue on their upward trajectory. You could start dollar cost averaging into your favorite stocks or indexes as 19x 2022 earnings for the SP 500 is not expensive compared to recent history. Commodity price may settle down or decline slightly reducing some of the inflationary pressures. This will give the FED more time to slowly raise interest rates.
If these attacks become a long term occupation and NATO responds with force things could get ugly for markets, commodity prices will spike even higher potentially cementing us in a stagflationary hell.
Bottom line things will be volatile for the weeks ahead and you need to prepare mentally to follow your investment plan.
Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.
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