War in Ukraine - Special Update [Video]

The Russian invasion of Ukraine continues.  Putin views Ukraine as a strategic territory in re-establishing Russia’s Soviet-era geopolitical clout. The recent precursors to this war extend back to the Russian invasion of Georgia in 2008 and the annexation of Ukraine’s Crimean Peninsula in 2014.  Those two incursions telegraphed the Kremlin’s intent to recoup what it depicts as lost territory. The strength of the Ukrainian resistance has been steadfast and our thoughts and prayers go out to those that are fighting for their country. 

The Response from the West has been strong

The West has responded with significant economic and financial sanctions.  The U.S. Treasury has sanctioned Russia’s largest banks and financial institutions.  The U.S. and European have prevented Russia’s central bank from selling its currency reserves in efforts to stabilize the ruble.  With these and additional measures, Russia is on the verge of being expunged from the global financial system.  While Russia is one of the world’s top oil exporters, it only accounts for about 3% of global gross domestic product (GDP).  The West hopes to exert enough economical and financial damage to force Putin to re-think his actions.

Geopolitical sell-offs are typically short-lived

While the current situation in Ukraine is dour, the negative market impact of similar geopolitical events have been short-term in nature.  Following the onset of the initial crises noted below, equity markets tended to provide positive returns over the following 6 and 12 month time period

Fed expected to raise short term rates in March

With surging inflation, the Fed is widely expected to raise short-term rates during their mid-March meeting as planned - despite the war in Ukraine.  The conflict has the potential to add to the current inflationary environment through elevated energy prices which would reaffirm the need to slow inflation.  That said, we consider the current situation fluid pending potential escalation of the Ukrainian crisis.

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