A few thoughts on Ukraine, geopolitics, and the stock market

Market volatility may linger even as economic risks appear limited

Children play on a tanks displayed at the Motherland Monument on the newly created "Unity Day" on February 16, 2022, in Kyiv, Ukraine. (Source: Getty)

A lot of recent headlines¹ have attributed recent market volatility to the heightened tension between Russia and Ukraine.

Those headlines may or may not be accurate.

There are plenty of other reasons why investors may be selling stocks. To name a few: Interest rates are rising. Inflation has been growing at the fastest clip in decades. The Federal Reserve is signaling increasingly hawkish monetary policy in the months ahead. Earnings growth is decelerating. And then there are the constant ebbs and flows of the pandemic.

Regarding Ukraine, there’s actually a lot of research going around that concludes whatever happens will have a limited impact on the economy and markets. (We’ll get to this below.)

Nevertheless, what’s going on represents a source of uncertainty. And markets will gyrate as traders weigh the odds of escalation and speculate what it could all mean for the business environment.

"A Russian military action would likely add to general market nervousness,” Fidelity Investments’ Dirk Hofschire said. “Current stock market volatility is reflecting a variety of investor concerns, so another source of uncertainty and disruption wouldn't help."

Expect some market volatility despite limited economic impact

Below are excerpts from Wall Street research that consider the economic and market implications of disruptions in Russia and Ukraine (emphasis added).