The Stress Is Real

The market closed red across the board as geopolitical tensions and economic turmoil continue to stress investors. 🚨 Russia announced that it ordered some troops to retreat from the Ukrainian border, but Washington remains on high alert; meanwhile, the Fed deliberates raising interest rates even higher.  📈

Earlier this week, President Biden announced that there is a “high risk” of Russia invading Ukraine “within the next several days.” However, the White House also has “not verified” Russia’s announcement that the country withdrew some troops from Ukraine’s border — the U.S. believes there could be up to 150,000 Russian troops on the border of Ukraine and Belarus. Uncertainty about Russia’s situation saw the Dow, S&P 500, Nasdaq, and Russell 2000 drop -1.78%, -2.12%, -2.88%, and -2.46%, respectively. 

But Russia isn’t the only topic of conversation among anxious investors — inflation continues its climb to its 40-year highs, and this week showed U.S. jobless claims surge to 248,000, a week-over-week increase. The 10-year Treasury yield dumped 2%, but gold is up 1.6% on the day. Oil also slid lower as economic sanctions and geopolitical uncertainty pose threats to oil supply across the globe. 🌎 And last but not least… the Fed Reserve Bank of St. Louis declared that rate hikes may need to exceed 2% to arrest inflation. 

Peter Essle of the Commonwealth Financial Network said it best: 💡

“Investors, wary of any bad news, have been unable to maintain positive momentum in equity markets across the globe as geopolitical risks dominate headlines. A further escalation of tensions in the near term could roil markets due to the potential impact on a tenuous global supply chain, particularly as the Fed prepares for its first-rate hike in years. A perfect storm may be on the horizon if calmer heads don’t prevail.”

The news-conscious Rip readers among us are probably aware of an ongoing drama with our neighbors to the north in Canada. 🇨🇦

Truck drivers and other members of the so-called “Freedom Convoy” blocked traffic at border crossings in response to Canadian and U.S. laws requiring truckers to be fully vaccinated. Members of the Convoy appeared to conflate the vaccines with authoritarianism, a common belief among individuals opposed to vaccines and vaccine mandates.

The Convoy first blocked the Ambassador Bridge (between Detroit and Ontario), prompting concerns about how the event would affect the supply chain and stability of the country. In response, Canada’s Prime Minister Justin Trudeau used a law which gave the government “emergency powers to end blockades.” Since then, the local government in Ontario encouraged protestors to amicably disperse from their blockade. They will continue their protests at another designated area.

On the whole, this is a fairly dramatic response to… well, a fairly dramatic event. Canada, the U.S.’s second-largest trading partner, will now use the law to clear any other blockades and restore some sense of normalcy.

However, stateside supporters of the Convoy have taken note — some have sent financial support to the Canadian truckers using cryptocurrency and dollars. Once Trudeau issues his Emergency Act declaration though, those funds are at risk of being frozen or reported to financial regulators — namely on the basis of the country’s anti-money laundering laws. 

The Convoy is important because it could encourage “copycat” events in the States. Ultimately, the takeaway is that people protesting were having a meaningful impact on the flow of free trade, prompting other truckers to find alternate routes, and causing delays to make a political point. We’ll be watching this development (and what stems from it) as it has ramifications for the economies of North America. 💡