Winds of War (TWTW – Feb 21-25, 2022)

Winds of War (TWTW – Feb 21-25, 2022)

Having lied repeatedly in recent weeks regarding a pending attack on the Ukraine, Vladimir Putin ordered Russian troops to attack this week, unleashing a flurry of sanctions on the part of Western countries all appalled by this unjustifiable attack on a sovereign country.

The Kremlin’s leader’s playbook resembles that of one Adolf Hitler claiming back in the 1930s that he was looking out for populations of German descent.

The implications of this attack are that it demands a forceful response, beyond just economic sanctions, which by the way are detrimental to those imposing them, as to a great degree, many countries in Europe are dependent on Russia as a key source of Energy. Is this a “Chamberlain” moment for politicians of our generation? The Bidens; Johnsons; Trudeaus; and Macrons of today? Do they have what it takes? Putin evidently must believe that not to be the case. The history between Ukrainians and Russians isn’t exactly good … But the weird thing about wars in recent decades, is that the “winner” often times ends up the loser … Recall Russia leaving Afghanistan, and only last year, America leaving … Afghanistan.

What will coming weeks bring beyond continued heighted volatility? That remains to be seen.

Fact is, markets reaction this past week was relatively subdued, as illustrated by the latest numbers in terms of weekly performance numbers on the sector; thematic; and factors front (see further below).

Key beneficiaries? Thus far Energy and Commodities related. The implication? not great for inflation. Europe could presumably easily be tipped into recession by all of this … + the US, well, on the one hand inflation numbers here aren’t going to be helped by any of this either, which … the FED should want to fight (recall we’re supposed to see first hike next month …), but on the other, here too, market action may cause them to pause, leaving them even further behind the curve at this point. Catch up and … well, again heightened recession risk. What gives?

Weekly performance numbers:

Sectors:

Factors:

  • Small Cap leading is more a function of its “Energy” content than of the Small Cap side of the equation imo…

 

Thematic:

  • somewhat surprising in my books to see more movements to the + side than the – side this week, but then again, performance across thematics has been rather negative thus far in 2022 …

YTD performance numbers to Feb 25, 2022:

Sectors:

  • Continued leadership found in Energy; Materials; and financials. If anything, the implications of this past week’s aggression are that this leadership could be magnified, even if … at risk then, if/when recession risks rise meaningfully …

Thematic:

Factors:

 

Canadian Banks: Generally beating earnings for Q1, 2022, with RBC reporting 6% Q1 profit growth, while competitors CIBC and National Bank reported stronger growth numbers (15 and 22% respectively), allowing for a strong bounce in Bank stocks alongside recovering markets, particularly at week’s end.

Pipelines – While Nord Stream 2 gas pipeline’s future is now very much in question … perhaps a better question to ask would be: why is the US importing Russian Oil … and would it not have been better to get Canadian Oil via Keystone XL Pipeline, Mr. Biden?

Volatility – receding somewhat by week’s end … although … renewed spikes very likely given the severity of the situation as far as war between Russia and the Ukraine: