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Week Ending February 25 Financial Markets Update

The S&P 500 Index ended the short week up modestly but not without sinking nearly 6% at one point before sharply returning to normal. Thursday was the most exciting day by far as markets digested the reality of the Russia-Ukraine conflict escalating to combat levels. The S&P 500 opened 2.5% below the previous night’s close but came roaring back as the market priced in less interest rate tightening from the Fed and glimpses of hope that the two Eastern European countries would invite peace talks. President Biden, along with other Western leaders, announced sanctions against the banking industry in Russia which would intentionally cut Russian banks off from the global economy but left the energy sector relatively untouched. The market expects the Fed to become more dovish in response to the geopolitical uncertainty.

Early in the week U.S. President Joe Biden announced sanctions on Russian banks and sovereign debt and the yield curve flattened to have the lowest 2-year to 10-year spread since April 2020. Early on Thursday, Russian President Vladimir Putin shrugged off these sanctions and ordered military operations, which began the conflict in Ukraine. President Biden responded with additional sanctions on Russia but stopped short of any restrictions on trade with Russia for oil or natural gas, which included allowing energy payments to Russia to continue. Yields dropped significantly early on Thursday but rebounded to end the day down only a few basis points among all maturity lengths. Fears of a significant economic impact subsided on Friday as Russia agreed to Ukraine’s requests for talks, and investors turned their attention to Inflation.
The interpretations and organizations of these ideas are the confidential thoughts of 1st & Main Investment Advisors and do not represent the opinions of BFCFSDifferent types of investments involve varying degrees of risk including market fluctuation and possible loss of principal value. There can be no assurance that any specific investment strategy will be profitable. *some content provided by First Trust Portfolios L.P.  Member SIPC and FINR

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