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With the war in Ukraine approaching its one-month mark and inflationary pressures rising, many investors are asking: What’s there to feel good about? The Fed is mulling the same question as it contemplates its next steps. The latest Markets in a Minute offers some answers.
Markets in a Minute: Ukraine
As the Federal Reserve contemplates its next steps, it’s keeping a close eye on the war in Ukraine and the implications for the U.S. economy. The war, however, hasn’t changed the Fed’s playbook: The central bank will remain largely focused on the same economic metrics it’s been monitoring all along.
Many of those indicators are holding up relatively well amid inflationary pressures and other risks:
With the release of key indicators for March, the Fed and investors will have a better sense of the war’s economic fallout. We’re likely to see a bigger impact on Europe than on the United States — and not just because we’re farther away from the battlefield:
Interestingly, the most-likely probability for the year-end Fed Funds target rate has remained fairly consistent since early February, according to the CME Group’s FedWatch Tool:
Tighter monetary policy, high inflation and the war in Ukraine have weighed on U.S. stocks. But there is a silver lining to market’s recent downturn. By most metrics, S&P 500 valuations have retreated since the start of the year. In fact, the market’s price-to-forward earnings ratio has fallen to pre-pandemic levels.
While stocks aren’t cheap, they’re less expensive than they were in late 2021, which may present investors with good buying opportunities. As the recovery matures, we continue to favor high-quality stocks, or those with reliable growth models and strong balance sheets. Market downturns may also be an opportune time for investors to rebalance their portfolios, with the aim of buying low and selling high.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Advisor Services Holdings C, Inc., d/b/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Private Wealth Services, LLC, Kestra Investment Services, LLC, Kestra Investment Management, LLC, Bluespring Wealth Partners, LLC, and Grove Point Financial, LLC. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by any entity for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Kestra Advisor Services Holdings C, Inc., d/b/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Private Wealth Services, LLC, Kestra Investment Services, LLC, Kestra Investment Management, LLC, Bluespring Wealth Partners, LLC, and Grove Point Financial, LLC does not offer tax or legal advice.