Feb 22, 2022 - Economy & Business

Markets sound alarm amid Ukraine crisis

Red alarm with dollar sign

Illustration: Annelise Capossela/Axios

Investors unloaded stocks today as Russian troops began entering Ukraine.

Why it matters: Wall Street generally hates uncertainty and had already been grappling this year with tightening monetary policy — before the potential for war popped up.

Catch up quick: Markets want a quick resolution to at least a decade-long problem — Ukraine’s potential membership in NATO and Russia’s reaction to it, Anastasia Amoroso, chief investment strategist at iCapital, tells Axios.

  • The S&P closed in correction territory with all 11 sectors down, with consumer discretionary (-3%), energy (-1.5%) and materials (-1.4%) stocks faring the worst.
  • Brent crude earlier in the day touched $99.50 a barrel, its highest in eight years.

What they’re saying: A lack of volatility made 2021 stand out, so a sell-off is normal, John Petrides, portfolio manager at Tocqueville, tells Axios.

  • “There are so many cross currents going on right now, [making it hard] to put a nice little bow around an explanation for the market volatility,” he said.
  • Fears of further supply issues to oil and gas are exacerbating the inflationary concerns, which in turn brings up fears of rates rising higher and faster than previously thought, says Petrides.

Be smart: Technology and consumer discretionary stocks tend to be the biggest casualties during “risk-off” days, and in general, they struggle the most in a higher interest environment due to relatively high valuations, says Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

The big picture: Historically, geopolitical events like this tend to be very short-lived, says Frederick.

The bottom line: “Either conflict happens or it doesn’t. The uncertainty causes traders to get fatigue and throw in the towel to sell,” according to Petrides.

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