The situation in Ukraine deteriorated rapidly this past week, moving quickly from a tense situation into a full-fledged Russian invasion that has put Ukraine’s 44 million people in jeopardy and shaken European security.
The situation in Ukraine continued to take center stage last week, crowding out most other financial news. US President Joe Biden, citing US intelligence agency information, stated that he believes Russia will attack Ukraine in the coming days.
Two all-too-familiar stories dominated the financial news cycle last week: inflation and the situation in Ukraine. The two rattled investor confidence and contributed to the S&P 500 index, a proxy of large-cap US stocks, dropping 1.8 percent for the week.
Standing in stark contrast to the message of unity associated with the ongoing Winter Olympics, tensions in eastern Europe continue to rise as Russia has amassed more than 100,000 troops, along with tanks and artillery, near the border of Ukraine.
January was an ugly start to the year for the capital markets with the S&P 500 index declining more than 11% at its worst point before recovering to a loss of 5% for the month.
Risk assets, in general, fell again last week as concerns over inflation, Federal Reserve rate hikes, the omicron variant, and geopolitical tension weighed on investors.
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A new year is underway, and it started off in a relatively inauspicious way for market participants. First the positive news – the US unemployment rate fell to below four percent in December and employee wages grew, as well.
For many investors, 2021 was a year of robust gains with the S&P 500 index returning nearly 29%, but there was significant dispersion in results across industries and geographies. Areas like emerging markets declined 3% as a category as geopolitical risk in China and pandemic-related challenges continued to weigh on these markets.