February 22, 2022
Good morning,
Last Monday, following a down -2%-ish week, we listed a half a dozen market concerns constituting a rather high wall of worry that the market would have to climb in order to resume its bullish tendencies. We postulated that only bad news could possibly be good news provided the market had finished discounting the worst in January (as the indicators suggested).
By Wednesday of last week, it was clear that any wall of worry climbing by the market would have to be put on hold until more clarity (less uncertainty) was brought to the Ukraine border situation. The market closed last week down -1.57% in S&P terms. That is about -3.5% and two weeks of discounting the threat of Russia’s invasion of the Ukraine.
With more saber rattling from Russia over the weekend, the U.S market (via S&P Futures now d/t the holiday) fell another 2% as Monday morning trading began in Europe. Sanctions are being levied by the EU and UK today, and the US is expected to join in as the day here progresses. Futures have rallied about 2% during the European trading session and look unchanged-ish from Friday’s close as the US cash market opens.
I don’t know if a 5.5% decline is the right discount for a Ukrainian invasion. I only know that the market abhors uncertainty of any kind, and often responds favorably when it is removed regardless of the path of removal. It often happens in elections, perhaps we are seeing some of that in geo-politics this morning as well.
This is a very fluid environment, the VIX is now at 30 – I’ll be back tomorrow, hang in there, this too shall pass.
Be well,
Mike