The U.S. is expected to expand its sanctions against Russia.
In the past seven days, there have been three events and announcements from both camps, the east, and the west. The first event was the recognition of two separate regions by Moscow and the Russian president. Following the recognition, NATO and its allies, including the United States, claim that Russia is only one step away from launching a military invasion of Ukrainian territory. NATO officials believe that Russia’s intentions are serious and it’s time for its allies to move and respond to this threat.
Yesterday, on February 22, the U.S., European Union, and Britain announced their plans that could lower this tension. These three allies now are targeting banks and elites, which should put Russia in a position to urge them to retreat or withdraw from their threat. On top of that, Germany is currently targeting Russia’s gas pipes. As we see, there is a clear sign of aggressive tension, yet from the Russian part, Moscow is denying all accusations and says it will withdraw its troops from the Ukrainian borders.
This geopolitical tension has encouraged or decreased fears in the stock market among investors and shareholders. Investors are afraid of a war scenario and have started to sell their stocks before they get even lower.
That takes us to this week’s third event, Biden’s announcement. Yesterday, Biden announced that the U.S. would expand sanctions against Russia. The U.S. and its allies will add new penalties against Moscow and its president.
The stock market, on the other hand, had a negative reaction to recent announcements, particularly the bond market and the S&P.The S&P 500 has confirmed or is on its way into a correction. Wednesday morning, the S & P index fell back by 1%, which leaves the S & P down more than 10%. A correction is a must at this stage.
Inflation has been such a burden on the S&P and now the geopolitical has pushed it into the correction territory. Investors are having split-second thoughts; some are feeling optimistic, while others are getting more pessimistic day by day.
The small-cap Russell 2000 index logged a 20% decline from its all-time high; treasury yields and bonds also recorded other increases, including mortgage rates. Gold prices have risen in recent weeks, and Brent Crude reached $97 at the same time today.
Next month, the Federal Reserve will start their first interest hikes, and now investors believe that these hikes, combined with recent events, will increase inflationary pressure.
The global industry is now suffering from low commodity prices, high material prices, and additional costs. The labor shortage problem might have a solution at last. The Omicron variant is retreating in some sense; its cases have plummeted by 90%.
There is still an overhang of doubts about the Federal Reserve’s tightening policy, and that doubt has increased now. The current Ukrainian crisis might force the Federal Reserve into a series of aggressive hikes, some even claiming a 50 basis point hike. That will lower the value of earnings for high-growth companies and investors as well.
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