Monday, February 28, 2022

Financial sanctions from countries around the world are having the desired detrimental effect on Russia, being penalized for its invasion of Ukraine last week, but are also hitting global markets in Europe, Asia and now the U.S. The Dow is -450 points at this hour, the Nasdaq is -200 and the S&P 500 -65 points. These are a tad off the pre-market lows we saw very early this morning.

Some Russian bank lenders have been removed from the SWIFT system of international lending, which has helped the Russian ruble to plummet versus the U.S. dollar. The Russian national bank has hiked interest rates 20%. Banking exposure to Europe is big among Citigroup (C Quick QuoteC - Free Report) and Goldman Sachs (GS Quick QuoteGS - Free Report) — 26% and 22%, respectively. So we’re seeing collateral damage where we’d expect to see it, and it will be some time before the dust clears.

We’re also seeing military support from countries in the E.U. going to thwart Russia’s aggression, for the first time in many decades. Further, the U.S. and its allies are considering tapping emergency oil reserves, as the Nord Stream 2 pipeline from Russia to Western Europe remains closed. It’s a multi-faceted attack on Russia and its autocratic leader, Vladimir Putin.

Advance Trade in U.S. Goods for January hit an all-time high (or low) -$107.6 billion, from a more narrowly revised -$100.5 billion the previous month. The trade deficit only reached 12-figures very recently; until the mid-1970s, our goods trading carried a zero-balance. Building up depleted inventories caused imports to rise +1.7%, with autos +5.1% in the month.

It appears as though the world is taking the support of Ukraine much more seriously than many had predicted — certainly more than Putin had calculated. This means we can expect to see a near-term economic dip, hopefully to be restored back to its more robust post-Covid growth trajectories sooner than later. We are still a couple weeks out from the next Fed policy decision and Q4 earnings season is nearly complete. Right now, these economic maneuvers are the only game in town.

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