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WEEKLY INVESTMENT PERSPECTIVE

A handful of tech companies reported earnings results this week, but it was Russia's invasion of Ukraine that claimed the attention of investors across the tech sector and the broad market. After initially selling off on the Russia-Ukraine conflict last week the stock market had an amazing comeback, rallying on the belief that the conflict could result in a slower rate-hike cycle than was expected. The S&P 500 ended the week with a 0.8% gain after dropping as much as 5.5%, the Nasdaq Composite popped 1.1% after plunging as much as 7%, the Dow Jones broke even after losing 5.3% midweek, and U.S. West Texas crude oil pulled back after briefly topping $100 per barrel.

Throughout the weekend, the Russian advance into Ukraine continued as they entered Ukraine’s second largest city, Kharkiv. Russian President Putin also put his country’s nuclear forces on high alerts Sunday, against a growing backlash of sanctions. One of the biggest sanctions came from the US and EU countries and their intent to cut off some Russian banks from the SWIFT network, which is a global payment system that connects international banks and facilitates cross border financial transfers.

Governments aren't the only ones wounding Russia's economy as a move to divest from the country takes hold among corporations. British oil major BP, the biggest foreign investor in Russia, sold its largest single field exposure and both Dell and FedEx announced a halt to Russian businesses.

While volatility is likely to remain elevated in the near term, geopolitical events have typically not had substantial impact on equity markets over the long-term. Historically, the S&P 500 recovers from geopolitical market-shock events within 47 days on average. It should also be noted that U.S. companies have little exposure to Russia and Ukraine, with less than 1% of revenue derived from those countries according to FactSet. Our investment team maintains an overweight allocation to U.S. equities and an underweight allocation to European equities. Like always, our team is monitoring the situation and we are working hard to provide the best advice for you to meet your financial goals. Please reach out to your First Merchants advisor with any questions.

 

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