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Mosaic Weekly Article 2.18.2022

February 19, 2022

The increasing tensions along the Ukrainian border have kept pressure on our markets again this week. It appeared we were seeing some relief a few days early on but as the week unfolded things certainly reversed course. There is also continued commentary coming out of St. Louis Federal Reserve President, James Bullard, who is calling for a much more aggressive and proactive stance from his colleagues and fellow Board members. He appears to be “all in” on getting inflation under control even if the means being aggressive now in raising interest rates.  As we all know, the Federal Reserve Board has a very important role in trying to keep our economic recovery on track and in motion. Having dissenting views and opinions can provide healthy dialogue and debate. Each respective role and voice as a voting member must be heard, analyzed, and evaluated. Their job is not an easy one and certainly not in times like these. The goal is to cause as little disruption to our financial markets as possible. But as we are seeing it unfold presently, that can be about as calm as a bull in a china shop. It remains to be seen how this will play out, but I believe that a slow and steady pace will be how the long game will be achieved.

A slightly more pressing matter, and what I believe is causing more alarm to the markets in the immediate future is the firm belief that Russia does indeed plan on invading the Ukraine. Late on Friday, President Biden suggested that President Putin has decided to carry out an attack “in the coming days”. In an address from the White House, Biden explained that Russian troops have now surrounded the Ukraine on multiple sides with plans on advancing in the very near-term. From a historical standpoint, wars often have little sustained impact on stock markets or economic growth here at home. A war between Russia, the Ukraine and the NATO allies could prove different. But history is more often on the side of “shrugging it off”. It’s the lead-up that causes uncertainty and that is exactly where we sit right now. The biggest potential impact could come in the form of more near-term volatility in the energy sector, but in reality, we could solve this issue with our own unlocked potential here in the U.S. In times like this, we need to act prudent and follow our instincts. That simply tells us to stay true to our investment thesis and not act emotionally. This article from Investopedia explains this in a simple and effective manner.

On a lighter note, the impending avocado dilemma seems to be heading in the right direction, as a temporary halt to imports of the in-demand fruit (or is it a vegetable?) was lifted on Friday. The U.S. Department of Agriculture had issued a temporary suspension on any imports based on safety concerns. Prices were set to skyrocket as demand far outpaces supply already. I for one would have had serious issues if this had dragged on for some time. Not to mention my 3 sons who could live off a steady diet of tacos and Chipotle.

As we head into the long Presidents Day weekend, we have much to consider with a plate full of newsworthy events. The financial markets will be closed on Monday in observance of this holiday which during times like these can be a good thing. Taking a step back and seeing the big picture is important from time to time. No one likes the uncertainty but that is life, and we must be willing to adapt and plan accordingly.

Now, who wants some guacamole? Have a nice weekend.