“War: What Is It Good For? Absolutely Nothing,” Says Charles Schwab
Russia’s invasion of Ukraine and the West’s retaliation with sanctions on Moscow have raised the risk of recession in many countries, already reeling from high inflation and declining economic growth, when the world saw the pandemic in the rearview mirror. was started by Charles Schwab, a major US investment management firm.
Given the complex state of the global economy, financial markets have been badly crushed and remain volatile, unable to reliably gauge price impacts from the news flow.
“The titles of these reports have always been courtesy of famous (and often more obscure) rock songs, but today, few songs resonate emotionally with Edwin Starr’s song War,” wrote Liz Ann Saunders, chief investment strategist. Kevin Gordon, a senior investment research specialist at Charles Schwab, put it in a report titled: “War: What’s It Good For? Absolutely Nothing.”
“It’s been a tremendous two years, with Russia attacking Ukraine, just as it looked like we might be putting the COVID-19 virus in the rearview mirror. The immediate impact of the war on the US and international economies is through energy markets.” Nevertheless, sanctions imposed on Russian banking and payment systems have also created significant volatility in currency markets. Significant flattening of the US yield curve for the first quarter of this year and a fall in GDP forecasts for an already growing recession. is pointing to the risk of … a war, clearly upping that former,” he noted.
The price of a barrel of crude oil has already moved upwards in March on supply concerns in January and hopes of a strong global economic recovery as Russia launched an invasion of Ukraine on February 24. Oil is now almost double what it was in early December. ,
Risking high US fuel prices, which could stifle economic growth, the US has banned oil imports from Russia, as well as on Moscow for starting the most important war in Europe since World War II. In addition to the widespread US and European sanctions imposed.
“As the stock market continues to remain tense and many sentiment metrics turn sour, pundits and analysts believe that equities may be ready for a reverse move. While it may indeed be true that pessimism is historical. While this has been in line with strong gains for equities, we would emphasize that a positive catalyst is generally needed to provide lift,” said Ms. Saunders and Mr. Gordon.
“Obviously this could come through a ceasefire and/or a quick return to energy prices, but it seems foolish to bet on that in the short term. Market weakness is not a new Russia/Ukraine-related phenomenon. To keen observers Know that the width between the traditional indices was getting worse before Russia invaded Ukraine. No matter how you slice and cut it, the weakness is widespread, and the violent churning beneath the surface has dented the index levels this year. But have made their way,” he added.
In recent weeks, a wide range of other commodities, from palladium and gold to wheat, have also seen huge gains.
Gold has extended its explosive rally to an all-time high. At the same time, concerns about a supply crunch due to sanctions on Russia, the top auto-catalyst metal, kept its price near an all-time high. Brent crude prices have risen more than 30 percent since the start of the attack, while nickel prices doubled on Tuesday.
“The world is in turmoil; rising energy and food prices accompanied major non-human casualties. Russia’s invasion of Ukraine occurred during a period when inflation was already rising, the energy crisis was already looming, and Economic growth was already slowing down,” he said. Investment advisor at Charles Schwab.
“Given the limited excess energy and/or food supply that can be brought in quickly, and the austerity of monetary policy makers – read: The Fed, to halt rate hikes, a distinct possibility is that of energy and food prices This would lead to a spike in recession in various countries. In other words, the energy crisis is ‘solved’ through the destruction of demand that comes through the recession,” he said.