Conflict between Russia and Ukraine creates Opportunities in Stock Market

As the Russian and Ukraine conflict continues to rise, the U.S. stock market experiences a sharp drop then recovery. Last Thursday, Vladimir Putin’s military launched an invasion of Ukraine, with explosions shaking the cities of Kharkiv, Kramatorsk, Mariupol, and the capital Kyiv.

After the attacks, global stock markets fluctuated, however, the value of white oil, gold, and government notes rose. Following Russia’s invasion, the S&P gained 1.43%, NASDAQ rose by 3.34%, and the Dow Jones Industrial Average grew about 0.25%.

Furthermore, investor optimism grew as US President Joe Biden along with the European Union announced new sanctions on Russian elites, state-owned businesses, and banks.

Biden was quoted saying that Putin’s “aggression in Ukraine will end up costing Russia dearly, economically and strategically.”

Although western markets seemed healthy, the Russian ruble weakened to a record low as it declined 4.5% against the dollar. Additionally, the MOEX benchmark for Russian stocks dropped by almost 30%

The invasion has put heightened pressure on the global economy as countries have yet to fully recover from the COVID-19 pandemic and major supply chain issues. According to the Wall Street Journal, investors have used this opportunity to pile their money into risky assets. The Journal reports that this is in anticipation of the FED not acting aggressively to curb inflation.

Gary Black, a manager of Future Fund Active exchange-traded fund, notes that there was a pullback in the U.S. government’s 10-year Treasury note’s yield from 1.976% to 1.969%. According to Black, “That makes people more comfortable buying growth stocks.”

With investors getting more into stocks amidst the conflict, the S&P 500’s information-technology and consumer-discretionary sectors saw the most gains. According to several reports, the sectors grew by 3.5% and 2.5%, respectively as Netflix added $22.57, or 6.1%, to $390.03; Twitter gained $2.22, or 6.8%, to $34.98. Alphabet advanced $102.06, or 4%, to $2,653.82.

Simultaneously, the Defiance Next Gen SPAC Derived exchange-traded fund, rose about 3.2% to $17.40. Meme stocks rallied as well, with AMC Entertainment and GameStop’s prices growing by 12% and 8.5%, respectively.

“We might move past the geopolitical impact, but the market is still going to be concerned about the Fed’s intentions to move rates higher,” said Lindsey Bell, Ally’s chief markets and money strategist.

The conflict has also created a surge in benchmark prices for aluminum and nickel, both of which are widely produced in Russia.

“We haven’t had any serious military conflict in Europe for a very long time, so there’s no playbook for this,” said Gregory Perdon, chief investment officer at Arbuthnot Latham. “A lot has changed since last night.”

Source: Wall Street Journal, investing.com, USN