Apart from the horrific human tragedy of the Russian invasion of Ukraine and the disruption to world order, the likely impact on the U.S. economy and financial markets will be minimal.
- After two back-to-back weeks of losses leading up to the invasion, the S&P rebounded last week following the invasion, similar to how markets have behaved with most geopolitical events over the past 95 years.
- The Dow has fallen an average of 7.1% during 54 crisis events since 1907, but then bounced back once the fighting breaks out, gaining an average of 9.7% in the ensuing six months. (Ned Davis Research)
- Rising oil prices are likely but not a material problem: a $10 per barrel increase in the price of oil would boost U.S. headline inflation by 0.20% while lowering GDP growth by just 0.1% (Goldman Sachs).
The outlook for economic and earnings growth remains positive, but financial market volatility will continue through the year.
- Q4 S&P 500 earnings per share on track for 31% year-over-year increase (FactSet), with top-line revenue up close to 15% and profit margins showing little compression.
- Consumer and business balance sheets are in good shape, with consumer spending and business investment expected to boost economic growth into the range of 4% in 2022.
- Midterm election years tend to be among the most volatile out of the four-year presidential cycle, with average stock market drawdowns
Disclosure: Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC. Brokerage and Investment advisory Services are offered under the Keel Point brand. Investment Advisory services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.
When purchasing mutual funds, investors should consider the investment objectives, risks, changes and expenses of an investment company carefully before investing. The mutual fund prospectus contains this and other information about the investment company. Investors may obtain a prospectus by contacting the investment company or Keel Point at 256-704-5111. The prospectus should be read carefully before investing.