A loaded one

Russia situation

Y’all. This week was a lot. Stocks were on a total roller-coaster ride as investors tried to digest updates of the Russia-Ukraine situation. The worst came with reports of an attack and then the Russian siege of a nuclear power plant in Ukraine (which btw happens to be the literal LARGEST IN EUROPE). You add nuclear into warfare and obviously people become v unsettled. There was a push and pull across the week as commodity prices got pushed higher, interest rates dropped, and stocks fell.

Moral of the story: Historically, periods of conflict like this have proven to be great times to buy investments as markets typically overreact. It’s been said to “buy on the sound of cannons, sell on the sound of trumpets” and here’s to hoping we hear those trumpets soon. 

Fed Speak

We finally heard something directly from the horse’s mouth (Is that a saying? I think so but I can’t quite place it. If it is, it makes no sense but maybe it’s just Friday and this has been a loooooong week). Federal Reserve Chairman Powell testified on Capitol Hill this week and confirmed the central bank is still planning on raising interest rates to help control inflation despite what’s happening in Ukraine. Remember, the Fed literally has only two jobs – keep inflation around 2% (it’s ~3x that right now) and maintain full employment (we’re pretty much there, there are more job openings than people looking for jobs rn). The problem is – when something like a war happens, investors seek safer investments (aka US-issued bonds) and that sends bond prices higher (and interest rates lower). So, let’s circle back to that initial comment where Powell is still planning on raising interest rates. Do you see how that could be a problem?

Moral of the story: I don’t envy Powell’s job right now. He’s stuck between a rock and a hard place where he has to get inflation under control in the but also has to do that in the context of a war, because apparently just a global pandemic wasn’t enough.

Jobs report

One of the bigger economic data points released this week was the February jobs report, which came out Friday morning. We created 678k new jobs in February, well ahead of expectations for 440k, and the unemployment rate fell to 3.8% as a result. The leisure and hospitality sector led the new job gains, though the sector is still 1.5m short of its pre-COVID employment levels. Despite job gains coming in ahead of expectations, wage growth was relatively flat compared to the prior month as more lower-wage workers came back into the workforce.

Moral of the story: This was a really strong report, and all signs are indicating that the labor market is in great shape overall. But tbh the report was a blip on the radar for investors on Friday morning as markets tried to grapple with the Russia-Ukraine situation.

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