- Gold[3] & Oil[4] Reverse Spike
- Invasions Have Often Been Bullish for the S&P 500
- USD Pullback May See Demand Return To High-Beta Currencies
- Agile Trading to Persist as Russia/Ukraine Conflict Remains a Fluid Situation
Financial markets remain fixated on the fluid situation in Ukraine. Meanwhile, investors will be also assessing the impact of sanctions announced by Western governments and the likely soon to be announced retaliatory measures by Russia. That said, yesterday’s dramatic repricing across global markets did have a feel of reaching peak panic with notable Russia/Ukraine conflict indicators, gold and oil[5] both posting sizeable pullbacks from earlier highs.
Source: Refinitiv
Elsewhere, US equities bounced back from the Wall Street[6] open with the S&P 500 gaining 1.5%. As shown below, geopolitical events have often been short term in nature, with markets posting a full recovery in the subsequent 4-5 weeks. In fact, invasions of the past have tended to present an opportunity for bulls.
S&P 500 Performance During Geopolitical Risk Events
0 = Date of Invasion/US Intervention
The recovery in risk appetite has also been evidenced within the FX space, with cross-JPY[7] on the front foot, alongside, high beta-currencies. I believe there was an element of month-end USD buying that exacerbated much of the downside in major USD pairs, most notably GBP[8], given the timing of the reversal, which came right after the Ldn 4 pm fix. Going forward, I lean towards an extended recovery in high-betas such as the AUD[9] and CAD[10].
US Dollar[11] Chart: 10-Minute Time Frame
Source: Refinitiv
