Once again, we face uncertainty this week as the market and the factors that influence it, like the conflict in Ukraine, remain in flux. A frustrating aspect to the market is that the larger the impact an external issue has on stock prices, the more difficult stock prices are to predict. Currently, the crisis in Ukraine is the external factor that is so fluid from one moment to the next, traders have no choice but to hold on and wait it out.
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Monday: The Silver Lining Amidst Relentless Volatility
As expected, the market didn’t move last week (or at least stocks didn’t move very much). On the one hand this is good because it signals that traders are trying to look through to the end of the crisis in Ukraine. However, smart investors should have contingency plans in place for the three most likely trends for stocks and the S&P 500 as the Ukraine crisis drags on and inflation continues to skyrocket.
It is hard not to be confused and uncertain right now. While the market’s underlying fundamentals are strong, uncertainty around the impact of the crisis in Ukraine is keeping prices down. However, we think this is still a good time to accumulate shares while prices are low.
During Monday’s livestream, we covered how to plan for three upcoming market trends. Click here now to subscribe to our Monday and Thursday updates, airing at 7:00 pm Eastern.
Wednesday Weekly Update: Focus on Income This Week
Currently, the crisis in Ukraine is the external factor that is so fluid from one moment to the next, traders have no choice but to hold on and wait it out.
If we exclude the impact of the crisis, the underlying market fundamentals are still good. Earnings growth is expected to continue, jobs are being added, wages are rising, and interest rates are still near historical lows.
However, prior to the crisis, the big X-factor that had been triggering volatility was rising inflation rates. As we have explained before, inflation usually rises with economic growth, but if it outpaces growth, then it can damage the economy and reverse market gains.
At this point we are cautiously optimistic that a plan towards an end of the conflict will happen in the short term, which is the goal of the sanctions and export bans applied to Russia. For now, we expect support on the S&P 500 to hold near its lows established in February — near 4,150-4,200.
We expect traders to remain in a holding pattern while they wait for some signs of a potential resolution to the conflict.
Last Night’s Livestream: Soaring Inflation Threatens Stocks
Inflation is raging at levels we haven’t seen in 40 years, climbing 7.9% year-over-year. This puts the Fed in a tough spot and puts Wall Street on notice that rates could rise faster than previously anticipated during 2022, even if the war in Ukraine carries on and dampens global economic growth expectations. Can stocks hold at this current level?
With the yield of the 10-year treasury yield (TNX) climbing back up over the past three days, we are now back above the key 2% threshold. Just as in February, people are becoming tense in anticipation of the impact of this spike on the large tech stocks. For more on the inflation-threatening stocks, click here to watch last night’s Learning Markets YouTube livestream.
Don’t forget to catch our twice-weekly livestreams on Mondays and Thursdays at 7:00 pm Eastern on YouTube.
We’ll be back with you next week.
