After weeks of denying that he would invade Ukraine, Putin and the Russians did just that.
Apparently investors followed Baron Rothschild’s sage advice to “buy when there’s blood in the streets” as markets skyrocketed from 2.75% down on early Thursday morning to up 6.96% at the close on Friday.
The war is likely to lead to higher oil prices and thereby, higher inflation.
For the week US stocks were up by 0.93% while international stocks fell by 1.22%.
Prior to the rally, the NASDAQ 100 was close to a bear market, off by 18.46% on a closing basis, at the same time, Brent crude oil hit more than $100 per barrel. The Russell 2000 was off by 24% from its high.
Average home prices in major metropolitan areas rose by 18.8% for the 12-months ending in December. Home price growth is expected to slow going forward.
US stocks fell by 1.60%, international stocks by 0.37%, and bonds by 0.21%. The spread on high-yield bonds has expanded by 65 basis points year-to-date.
Russia continues to inch closer to a war with Ukraine. The Russians deny it, but all available intelligence suggests otherwise.
The 10-year treasury peaked on Tuesday at 2.05%, the highest rate since July of 2019. The rate fell to 1.92% by Friday. Some are making the case that a slowing economy and a possible war with Ukraine will cause interest rates to drop.
The debate is rising on how the Fed can get inflation under control without throwing the economy into recession. The Fed probably saved the economy from a depression when Covid hit, but went way overboard, along with Congress/Trump/Biden in pumping trillions and trillions into the system when we were well on the way to recovery. Now the Fed has to dig out of this mess.
Mortage rates are at their highest point since January of 2020.
US markets were down by 1.38%, international 0.18%, and bonds by 0.43%. Aside from the inflation news, stocks were hurt by the chance of a war between Russia and Ukraine.
Inflation hit a 40-year high of 7.5%, up from 7.0% last month.
St. Louis Fed President James Bullard said “I’d like to see 100 basis points in the bag by July 1.” That was enough for traders to price in a 96% chance of a 50 basis point hike in March.
Stocks were up in and up and down week, making it two weeks in a row.
Meta Platform’s (FB) fell by more than 21% on disappointing in earnings. But Alphabet and Amazon countered that with big advances. The FB drop was one-day market cap declined in history. The same can be said for the Amazon advance (except as an increase), one day later.
In Barron’s Up & Down Wall Street column, Randall Forsyth writes that Lacy Hunt, chief economist at Hoisington Management, and Garry Shilling, a well-known economist that runs his own advisory service, both go against consensus and expect bond yields to fall, not rise, mainly due to a weak economy. Shilling points out that recessions have followed 11 of the last 12 Fed tightening cycles.
In a Monmouth University poll seven in 10 Americans said :”it’s time we accept that Covid is here to say and we just need to get on with our lives.”
