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Weekly Market Insights: Ukrainian War Impacts Global Economy

Weekly Market Insights: Ukrainian War Impacts Global Economy

March 14, 2022
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Intensifying hostilities in Ukraine continued to unsettle markets, as investors grappled with the war’s impact on the global economies.

The Standard & Poor’s 500 dropped 2.88%, while the Dow Jones Industrial Average lost 1.99%. The Nasdaq Composite index fell 3.53% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.90%.1,2,3

Markets Remain Stressed

Markets gyrated last week as Russia escalated its attacks on Ukraine, the U.S. banned imports of Russian oil, and more companies announced the suspension of business in Russia. Eastern Europe has added complexity to the Fed’s plans for raising interest rates to manage accelerating inflation, which has been exacerbated by a sharp rise in energy and other commodity prices.

The stock market saw brief moments of respite. Stocks rallied Tuesday on a news report that Ukraine would promise not to pursue NATO membership, but lost momentum before the close. Stocks rallied on Wednesday as oil prices tumbled, but were unable to follow-through on Thursday and then faded further into Friday’s close.

A Four-Decade High

Consumer prices rose 0.8% in February as energy and commodity prices pushed higher. This latest monthly report showed a year-over-year inflation rate of 7.9%, the highest level since January 1982. Excluding the more volatile food and energy prices, the 12-month increase was 6.4%, a slight bump from last month’s 6.0% year-over-year increase.4

Many economists hoped that inflation pressures would ease, but February’s inflation number suggested that the impact of sanctions and supply-chain disruptions due to the invasion of Ukraine may likely feed further price increases for the foreseeable future.

Interest Rates

A likely recession in Europe (thanks Putin) is one consideration that is leading Fed Chair Jerome Powell to favor moving slowly on raising US interest rates.  The Fed does not want to spur an inversion of the yield curve between 2-year and 10-year bonds. But the way things look this morning, that may be in the cards regardless. The 10-year, which has at last broached 2% for the first time since the mid-summer 2019, is at 2.115% while the 2-year is 1.822% (12:46 pm Monday). An inversion of the yield curve often — though not every time — indicates a recession on the horizon.

Latin America

For the first time in my memory, Latin America is simultaneously benefitting from relative stability due to the Ukraine crisis and relatively favorable stock valuations due to high asset prices in Asia. For now, Latin America seems to be the place to invest, but most ETFs investing in the region focus on specific countries, which I am not qualified to evaluate, but one star performer has been the iShares Latin America 40 ETF (ticker ILF) which invests mostly in Brazil, Mexico, and Chile, 5% in Peru, and even less in the other countries of the region. As of Friday, ILF was up 15.52% YTD.

This Week: Key Economic Data

Tuesday: Producer Price Index.

Wednesday: Retail Sales. Federal Open Market Committee (FOMC) Announcement.

Thursday: Housing Starts. Jobless Claims. Industrial Production.

Friday: Existing Home Sales. Index of Leading Economic Indicators.

Source: Econoday, March 11, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

This Week: Companies Reporting Earnings

Monday: Coupa Software, Inc. (COUP).

Thursday: FedEx Corporation (FDX), Dollar General Corporation (DG).

Source: Zacks, March 11, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

"The strongest of all warriors are these two — Time and Patience."

– Leo Tolstoy

How Do You Repay Deferred Taxes?

As part of the Coronavirus Aid, Relief, and Economic Security Act, some self-employed individuals were able to defer paying certain Social Security taxes in 2020 over the next two years. But, how do you repay these deferred taxes?

  • Make payments directly through the IRS site by debit card, credit card, money order, or with a check

  • Ensure that these payments are separate from other tax payments

  • Ensure that the designee of the payment is “deferred Social Security tax”

You can select the reason for the payment when you view your balance due using Direct Pay. If you are using a card, you can select “installment agreement.”

* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov5

How to Test Your Vision at Home

You don’t have to go to the eye doctor to check your vision. In fact, you can do it right from home! Simply download a vision chart, like the one found on Vision Source’s website, and print it on a regular piece of paper. Hang it on the wall and measure 10 feet from the wall. Mark this spot because this is going to be your standing distance.

Then, cover one eye at a time to see how many letters you can read as they get smaller. Have someone keep track of your score and write down the smallest line where you were able to identify the majority of the letters. Each row is labeled with the vision it corresponds with (20/20, 20/30, etc.).

Tip adapted from Vision Source6

You are at sea, it is mid-July, and your ship has reached a unique spot on earth. If you sail north, it will be summer; if you sail south, it will be winter. If you sail east, it will be Friday, but if you sail west, it will be Saturday. Precisely where in the world are you? (Hint: your ship is in the Pacific Ocean, near the island nation of Kiribati.)

Last week’s riddle:  There is a word (four letters long) that begins with the letter I. If you put the letter A at the front of this four-letter word, it becomes a five-letter word which is pronounced exactly the same. Name both words.  Answer: Isle and Aisle.

Lake Como, Italy.

Footnotes and Sources

1. The Wall Street Journal, March 11, 2022

2. The Wall Street Journal, March 11, 2022

3. The Wall Street Journal, March 11, 2022

4. The Wall Street Journal, March 10, 2022

5., July 6, 2021

6., September 30, 2021

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

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