By Tyler Durden,
Some quick thoughts from JPMorgan's trading desk this morning.
The Russia/Ukraine situation dominated weekend headlines and culminated with Putin declaring 2 regions in Ukraine as independent and then signing an order to move in troops. US sanctions were quick to follow but, so far, only apply to those regions in Ukraine and not on Russia. The market response has been negative, with SPX futs -2.0%, NDX -2.7%, and RTY -2.1% on Monday night (6.25pm ET). WTI is through $94 (+3.7%), Natgas is at $4.82 (+8.8%). Base metals are higher, too.
The biggest question for the market, is whether there is a red line that Putin can cross that would move the US and NATO into a military response. That may be answered by Putin’s next moves, where he may choose to attempt to take the entire country or whether he uses this as leverage in a return to the diplomatic table.
Keep an eye on China and how much support they lend to Russia.
The fundamental impact to US stocks is minimal but vol should remain elevated, preventing a sustained rally. As this situation unfolds, and until we get the Fed decision, it does feel like this market will continue to move lower with higher quality companies outperforming on the move lower. Commodity-related Equities are likely to be the strongest overweight.