As we consider the tensions driving recent market movements, a Korean folk saying seems apt:
“When whales fight, the shrimp’s back is broken.”
The idea is that bystanders get hurt when big folks duke it out.
What are the tensions? Who are the bystanders?
An invasion of Ukraine may occur in the coming days or weeks.
Or it might not. It’s really impossible to say.
The U.S. has closed the embassy in Kyiv and warned of a dramatic buildup of Russian forces on the border with Ukraine.1
It’s unclear whether Russia is willing to diplomatically resolve security concerns about Ukraine joining NATO.2
However, a ground war between NATO and Russia would be extremely damaging, so it seems (hopefully) unlikely that Russian troops would actually invade.
Then again, they might.
That seesaw between high tension and relief is likely to add a lot of volatility to markets as investors digest the latest news.
The Federal Reserve 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.
Rate hikes are coming in 2022, but how many and how quickly? That’s up for debate by the Federal Open Market Committee next month.
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.
Bottom line: there are a lot of factors driving market movements, 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.
We’re keeping a close watch and are here if you have questions or concerns.
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
Advisory services offered through Wilon Wealth Management, a Registered Investment Adviser Firm.
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