The smog of war… Russia’s war on Ukraine has roiled markets and mobilized world leaders and businesses. The West has weaponized finance to punish President Putin’s onslaught, from sweeping sanctions to yacht seizures. The US stopped buying Russian oil, and major companies like McDonald’s and Coke halted business there. Meanwhile, the EU is scrambling to phase out Russian energy by 2027. Reduced supply from Russia has caused prices of oil, gas, wheat, nickel, and other key commodities to skyrocket. Oil fuels the global economy, from manufacturing to farming to shipping. High energy prices will likely slow economic growth — and could even trigger a US recession.
Inflation nation intensifies… so does pump anxiety. US inflation reached a new 40-year high last month, with consumer prices up 8% from a year ago. A gallon of gas is hitting $7 in some states. After two years of near-zero interest rates, the stimulus party’s over: the Fed started raising rates this month to cool prices, though only by half of what was expected. Despite all the war-driven uncertainty, Fed Chair Powell emphasized plans for more rate hikes. Now the US is in “boomflation” — inflation paired with strong growth and a nearly recovered labor market. But in an econ nightmare scenario, we could get “stagflation”: high inflation + sluggish growth.
The big bear(ish) market… Your portfolio might be feeling it. Stocks kicked off the year at records, after the market-tracking S&P 500 index gained 27% last year. Fast-forward three months: major indices are all down so far, and the techy Nasdaq is down 10% from its record in November. Giant tech stocks like Amazon and Microsoft are weighing down the whole market. As rates and inflation rise, the value of companies’ potential future growth is also falling. Cue: stock prices are being “corrected.” Meanwhile, pandemic thrivers like Peloton, Netflix, and Pinterest have plunged as demand sags.