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Drumbeat of War: February 2022 Markets

By on Mar 09 in Market Update

Quick Take.[1]

The West Hits Back With Sanctions

In our recent market update, we covered the initial fallout from Russia’s war on Ukraine. After the threat of a full-blown invasion became a reality, the West moved quickly to impose sanctions on Russia.

Key measures included curbing Russia Central Bank’s ability to access their $600 billion reserves and locking Russian banks out of the SWIFT financial network.[2] SWIFT is a worldwide financial messaging system for global banks that moves billions of dollars between financial institutions worldwide.[3] These measures could likely cause significant damage to the Russian economy and banking system.

The collapse of the Russian ruble erodes the currency’s buying power, which could also erode Putin’s popularity at home. The hope is that such crippling blows to the economy will bring Russia to the negotiating table and closer towards an end to its aggression against Ukraine. Hopefully the Russians bring some sincerity and negotiations can limit the human cost of war.

Retail Sales Rebound Despite Higher Prices

Here at home, even as prices climb America is still experiencing a consumption boom, and in January retail sales surged by the most in 10 months.[4] Cars and furniture sales saw the biggest gains, and retail sales overall topped expectations. Consumers spent more despite higher prices from lingering supply chain issues, omicron effects and labor shortages. As a result, economists may need to revise their expectations for first quarter economic growth upward.


Encouraging data on US economic activity suggests that the US can weather economic shocks spilling over from the Russia-Ukraine conflict. Moody’s Analytics chief economist Mark Zandi wrote that “The impact of the Russian invasion on the US economy will be on the margins.”[5]


Rate Hike Watch Continues

Coming soon is a highly anticipated Federal Open Market Committee meeting where the Federal Reserve is expected to announce its first rate hike, one of up to six rate hikes that Wall Street has priced in.[6] The question remains whether they will hike interest rates by a 25 or 50 basis points (0.25% or 0.5%). The Vice Chair and New York Federal Reserve Bank President John Williams was quoted as saying, “Personally, I don’t see any compelling argument to take a big step at the beginning.” Other Fed officials seem to support this steady approach. [7]


The market bounce following the Russian invasion partly bet on the idea that the Fed won’t be acting as aggressively to curb inflation given the backdrop of war.[8] More clarity is yet to come, as Fed Chair Jerome Powell begins Congressional testified in front of Congress last week, and he was questioned on inflation and the impact of geopolitical events, including the effect on higher gasoline prices.[9] He suggested that it is impossible to predict the trajectory of the conflict or the economic impact, but they are monitoring the situation closely. Additionally, the February employment report showed the US economy added a whopping 678,000 jobs, blasting past expectations. The unemployment rate dipped to 3.8% led by leisure and hospitality jobs and signals that the Omicron impact is waning.[10]

Retail Sentiment Bearish

With everything going on, it makes sense if you feel a little nervous—you wouldn’t be alone. An American Association of Individual Investors survey found the highest level of bearish and neutral investors since May 2016. However, interestingly enough, when you look back at history, heightened fear tends to be a bullish indicator for markets.[11]

Since 1990, when fear and uncertainty have risen to current levels, the S&P 500 has actually averaged 18% returns in the next 12 months.[12]

In general, market corrections are quite common, and market pullbacks are historically followed by rebounds.[13] It looks like some turbulence remains ahead, but resetting valuations are a part of the cycle and it’s important to stay calm and stick to a bigger picture plan.

War has devastating consequences, and Ukraine under siege casts a heavy shadow over an already volatile market. We can only hope diplomacy prevails to limit casualties and the human cost of conflict. Our thoughts are with the Ukrainian people fighting for their homes and their lives.

Here in the office, we are monitoring the impact of these events on our clients’ investment and financial needs, and we are looking for opportunities as they arise.

As always, we’re here to answer your questions or discuss market events at any time. Please don’t hesitate to reach out.


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The information expressed herein are those of JSF Financial, LLC, it does not necessarily reflect the views of NewEdge Securities, Inc. Neither JSF Financial LLC nor NewEdge Securities, Inc. gives tax or legal advice. All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed constitutes a solicitation or recommendation for the purchase,sale or holding of any security. Investing involves risk, including possible loss of principal. Indexes are unmanaged and cannot be invested in directly.

Historical data shown represents past performance and does not guarantee comparable future results. The information and statistical data contained herein were obtained from sources believed to be reliable but in no way are guaranteed by JSF Financial, LLC or NewEdge Securities, Inc. as to accuracy or completeness. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy. Diversification does not ensure a profit or guarantee against loss. Carefully consider the investment objectives, risks, charges and expenses of the trades referenced in this material before investing.

Asset Allocation and Diversification do not guarantee a profit or protect against a loss.

The Bloomberg Barclays U.S. Aggregate Bond Index measures the investment-grade U.S. dollar-denominated, fixed-rate taxable bond market and includes Treasury securities, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities.

The S&P 500 Index is an unmanaged, market value-weighted index of 500 stocks generally representative of the broad stock market.

The MSCI World Index is a broad global equity index that represents large and mid-cap equity performance across 23 developed markets countries and covers approximately 85% of the free float-adjusted market capitalization in each country.

The MSCI Europe Index captures large and mid-cap representation across 15 developed markets countries in Europe and covers approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe.

The MSCI Emerging Markets Index captures large and mid-cap representation across 26 emerging markets countries and covers approximately 85% of the free float-adjusted market capitalization in each country.

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period. GDP is the most commonly used measure of economic activity.

SWIFT – Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes. Although SWIFT has become a crucial part of global financial infrastructure, it is not a financial institution itself: SWIFT does not hold or transfer assets. Rather, its utility lies in its power to facilitate secure, efficient communication between member institutions.

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[1] https://www.forbes.com/sites/sergeiklebnikov/2022/02/24/dow-drops-800-points-nasdaq-falls-into-bear-market-after-russia-invades-ukraine/

[2] https://abcnews.go.com/Business/wireStory/explainer-wests-toughest-sanctions-russia-83136036

[3] https://abcnews.go.com/Business/wireStory/explainer-wests-toughest-sanctions-russia-83136036

[4] https://www.bloomberg.com/news/articles/2022-02-16/u-s-retail-sales-rise-most-in-10-months-defying-omicron-woes

[5] https://www.wsj.com/articles/u-s-positioned-to-withstand-economic-shock-from-ukraine-crisis-11646083994

[6] https://www.cnbctv18.com/finance/united-states-federal-reserve-officials-push-back-on-rapid-interest-rate-hikes-12554482.htm

[7] https://www.cnbctv18.com/finance/united-states-federal-reserve-officials-push-back-on-rapid-interest-rate-hikes-12554482.html

[8] https://www.wsj.com/articles/global-stocks-markets-dow-update-02-24-2022-11645676676

[9] https://www.cnbc.com/2022/02/25/with-the-stock-markets-snapback-the-focus-shifts-to-powell-testimony-and-jobs-report.html

[10] https://www.ft.com/content/d5c8010d-5993-4dcb-884d-2dadfcdf37aa

[11] https://www.aaii.com/sentimentsurvey

[12] https://www.marketwatch.com/story/swallow-your-fear-and-prepare-for-a-relief-rally-says-analyst-as-russia-invasion-in-ukraine-sparks-stock-market-maelstrom-11645710127

[13] https://intelligent.schwab.com/article/stock-market-corrections-not-uncommon


Performance table sources:

BBAB: https://performance.morningstar.com/Performance/index-c/performance-return.action?t=XIUSA000MC

S&P 500: http://performance.morningstar.com/Performance/index-c/performance-return.action?t=0P00001G7J&region=usa&culture=en-US

MSCI: https://www.msci.com/end-of-day-data-search

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