It feels beyond inappropriate to consider the Russia / Ukraine conflict from the perspective of the economy and capital markets given the horrific events taking place in Ukraine and the escalating humanitarian crisis that Russia’s invasion has unleased. But we are investors, and we must do our best to understand the implications of this geopolitical crisis on the economy and equities and how those developments should – if at all – impact our investment decisions.

The crisis has pushed investors toward risk-free assets, as the yield on the US 10 Year note has fallen 20bps+ since February 24th. All things being equal, that move lower in yields should prove supportive of US stocks. And the move higher in oil prices has accelerated, with WTI now trading north of $110 a barrel, a dynamic that foretells higher prices for gasoline and should prove to be a weight on consumer sentiment and possibly consumer spending (though spending has proven quite robust even as sentiment has soured of late). What is most encouraging, from a macro perspective, is the ongoing strength in the US economy, with initial jobless claims last week both beating expectations and coming in at their lowest level this year, the February jobs report easily topping expectations (678K jobs added vs 400K expected), and the unemployment rate dropping to 3.8% (see chart). That said, we recognize labor market data is lagging and the uncertainty caused by the conflict could impede hiring going forward; still, based on the state of the labor market and housing market and corporate profits, the US economy has great momentum as we move towards the end of Q1.

Finally, despite being more volatile of late, US equities – based on the S&P 500 – are essentially unchanged since Russia invaded Ukraine, while developed international markets have moved lower after outperforming the US for much of 2022. The relative performance is not surprising given the importance of European markets within the developed international markets universe, and the deeper economic ties those nations have with Russia, particularly around energy. As we all try and make sense of and navigate these exceptionally troubling times, we believe remaining well-diversified with a bias to US equities is prudent.

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital Investments, LLC, a registered investment advisor. 0419-BCI-3/07/2022