Russia invaded Ukraine by land, air and sea on Thursday, confirming the West's worst fears with the biggest attack by one state against another in Europe since World War Two.
Stock markets around the world slumped. The S&P 500 was off 1.2%, and the Nasdaq was off 0.35%. Investors shifted money into safe havens like U.S. Treasuries and gold. Wall Street's fear gauge, the VIX, jumped to its highest in a month.
Following are reactions from analysts and economists in response to unfolding events inside Ukraine and on their implications.
JOHN VAIL, CHIEF GLOBAL STRATEGIST, NIKKO AM
"The Ukraine situation complicates the policy outlook for the Fed as energy and some grains prices would likely rise further if the attack deepens. Meanwhile, domestic demand and corporate pricing power remain strong, so it is not easy for the Fed to support financial conditions by becoming a bit more dovish. However, the silver lining is that the decline in risk markets has helped prevent bond yields from rising to new yearly highs."
"We can be reasonably sure that the rise of bond yields in the major developed markets has climaxed. Accordingly, the pressure on the universe of defensive growth is being lifted. Europe's Banks are the losers here. The out-performance of Financials in Europe has climaxed. This said, it is not clear that Europe has the resolve to shut Russia out of the SWIFT money transfer system."
CLIFF HODGE, CHIEF INVESTMENT OFFICER, CORNERSTONE WEALTH, CHARLOTTE, NC
"The world just became a more dangerous place. From a market perspective, most geopolitical events are sharp, but short-lived with volatility creating opportunity. Oil prices are a problem, as they act like a tax and will certainly have an impact on economic growth, especially if financial conditions tighten further."
"Higher energy prices will also support sticky inflation which may keep pressure on the Fed to stay on course. Energy companies are the immediate beneficiaries, and more of the speculative areas of the markets will likely continue to be stressed. The conversation on bitcoin and crypto as a store of value, inflation hedge, or digital gold is dead, as it's proven to be nothing more than another momentum product in the liquidity lottery."
"While there may be some additional volatility in the short term, these dislocation events historically present opportunities, as long as recession doesn't follow. At this stage, recession is not a concern. We're most interested in high-quality technology companies that are now on sale. The risk reward in the market at these levels is compelling, especially when compared to interest rates."
HIMANSHU PORWAL, EMERGING MARKET CREDIT ANALYST, SEAPORT GLOBAL, LONDON "It is absolute carnage," "Unless you put sanctions on the likes of VTB, Sberbank, Putin is not going to care, and even then it would still fall short, you need to show some military resistance as well."
"Going by the rhetoric from the US administration on late Wednesday, other large Russian banks and State-linked entities that could potentially be next in line for sanctions -- VTB, SBERRU, RSHB, GAZPRU, ALRSRU, GAZPRU, RURAIL, GTLKOA (All state-owned Credits). If the US decides to go hard against all banks, other additional vulnerable names could be – ALFARU, SOVCOM, CRBKMO, AKBHC, GPBRU -- (all part of CBR's 13 strategically important banks."
MATTHEW TUTTLE, CHIEF INVESTMENT OFFICER, TUTTLE CAPITAL MANAGEMENT, GREENWICH, CONNECTICUT
"Short term it's causing a lot of volatility. Everything right now is on the table. There is a potential that we sell off big on this but I would not be surprised if the market closes in the green. As an investor, you've got to be prepared for both scenarios."
"Futures were massively down, it's really easy to think it's Armageddon here and the market opened up and buyers came in. Anything could happen."
"The media has been talking about it for a while – of Russian invasion and that markets will crash. But remember the first Gulf War. Obviously, a different situation but I remember leading up to it, everyone said 'invading Iraq, it's going to be a disaster, markets are going to crash, the economy is going to tank' and the day we invaded the market had a massive rally and didn't look back for months."
"Whether we have a bounce today or we sell-off, it doesn't change my intermediary bearish view but Ukraine is going to make things interesting over the next couple of days and week."
"There are a lot of people talking about buying the dip so I'm sure there are a lot of portfolio managers out there with shopping lists. We did some selective buying today; I bought a little more into shippers and dropped more energy but not doing a whole lot beyond that."
"Right now you want energy, gold, commodities and a lot of cash because there are going to be some great opportunities and you will need cash to take advantage of them."
KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH
"This has been the most telegraphed war in history, and yet we still seem surprised that it happened. We are completely oversold at this point. It's not just the highly-priced growth stocks that are suffering, it's now all stocks. The biggest risk factor that the economies of the world are going to see is the price of oil. But commodities are beautiful things because they have a supply and demand pricing and so I'm expecting more supply to come in the next few months but let's see what the other OPEC nations and non-OPEC nations do. The Fed is now going to be looking for diminished economic activity and may still hike rates, but not at the rate that everyone had forecast."
"Nasdaq nearing bear territory is a huge driver, especially among retail investors because they've piled into all the hot stocks and now, if they haven't gotten out, are looking at the ruin that is their portfolio. For better or worse, most retail investors buy too late and sell too late. All is not lost though, there are a lot of companies that are making good products on Nasdaq that are really in demand and the price of the stock is cheap now. So institutional investors may come in later and buy as a kind of balancing act."
"Stocks exposed to Russia are falling because people are worried that these companies might be taken off NASDAQ as a punishment or they fear that these companies won't be allowed to sell their products in the developed world as a punishment."
NEIL WILSON, CHIEF MARKET ANALYST, MARKETS.COM
"It's a gut check market, kind of sell-off knee jerk reaction. There's a lot of uncertainty in what might happen. It's all about near-term fear driving the market. We just don't know what's going to play out over the next few days. It's going to be tough. You don't know when the low is going to come. There's just so much uncertainty right now about how far the west could go with this. It's a confidence knocker. And when that happens, it is tough for the market to really scramble higher."
"I do not think many investors have dealt with the combination of surging inflation which was last really seen in the early 80s, combined with a full-scale military operation in Europe, which again, the last time that happened was the second world war. So this is sort of uncharted territory for a lot of people."
"The only upside you're going to see is bond yields come down, and we're already seeing bond yields really flatten and that's going to give some lift to some of the beaten-down oversold tech. Tech can get a bit of a lift and can drive some leadership for the broader market."
"Demand is going to take a hit versus what we thought maybe a couple of months ago demand. Oil prices, where they're at now, are destructive for demand. You're going to see tightening, but maybe not as much tightening as had been priced. The (central banks) can go a little bit softer."
RYAN DETRICK, CHIEF MARKET STRATEGIST, LPL FINANCIAL
"Will Europe get involved? Will the United States get more involved? We know more serious sanctions are going to come against Russia, but the fallout from that is just uncertain."
"This event in Ukraine is almost like a cherry on top to a very messy situation with the interest rate hikes coming and inflation concerns continuing to soar. 2022 has brought a lot of uncertainty for investors with inflation, rate hikes, and geopolitical concerns."
"The Fed is going to hike rates in March – that is near certainty. But (due to) these geopolitical concerns, the Fed could do a slight dovish turn later this year, if these uncertainties continue to impact the markets."
"There's a lot of negativity priced into the market. There's been a lot of selling before this potential event. So a well-deserved oversold bounce makes a lot of sense in the near term for investors."
"Valuations on some of the high-flying tech names have drastically come down on this sell-off. Now with some positive tailwinds from yields moving lower, there very well could be some buy-the-dip mentality."
CRISTIAN MAGGIO, HEAD OF STRATEGY AT TD SECURITIES, LONDON:
"Currencies that will underperform the most are the most volatile – the Russian rouble and the Turkish lira…
"For the rouble, and not to mention the Ukrainian currency, the other risk is that liquidity simply drags out. Investors will not want to be involved at all.
"What's going to happen, only Putin knows. As usual, Russian sources denied any intention to be militarily involved in Ukraine, and here we are, in the largest-scale military operation in Europe since World War Two. Anything can happen from here.
"The safe-haven bid is exactly what is happening."
JUSTIN ONUEKWUSI, PORTFOLIO MANAGER AT LEGAL & GENERAL INVESTMENT MANAGEMENT, LONDON
"This puts central banks in a really tricky situation. A March hike from the Fed is being priced out (and) the number of Fed hikes this year is being lowered because …it feels like it's the wrong time to start taking liquidity out of markets.
"Central banks may have to look through an inflation spike though that means ultimately rate hikes could become substantially bigger. I'd say medium-term inflation risks have increased substantially…
"Our view was 25 bps hike in the U.S. in March and the probability of that is definitely lower"
FREDERIK DUCROZET, STRATEGIST AT PICTET
"(This) will make the ECB more cautious and may delay the decision on tapering bond purchases."
KEITH TEMPERTON, SALES TRADER AT FORTE SECURITIES
"There's no denying that it puts pressure on supply chains and the likes of the German industrial complex for their energy needs.
"We haven't seen such a confluence of factors like sky-rocketing commodity prices and potential stagflationary scenarios. It's the worst possible recipe for stocks."
GULDEM ATABAY, ANALYST WITH ISTANBUL ANALYTICS
"Turkey potentially will be impacted most by the rise in energy prices…Sanctions are not expected to be announced for now but Turkey needs to abide by NATO's steps."
WU QIANG, INDEPENDENT POLITICAL ANALYST, BEIJING
"This is a very unfavourable situation that an unprepared China has been pulled into by Russia."
"It is possible that China may lose its existing relationship with Europe, a friendly relationship, and that China and the United States may soon fall into a confrontation because of a quasi-alliance between China and Russia. And so far, China has not shown a great willingness to stop the war."
TAKAHIDE KIUCHI, EXECUTIVE ECONOMIST, NOMURA RESEARCH INSTITUTE, TOKYO
"Russia taking control of Ukraine would set a bad precedent, sending worrying signals to geopolitical flashpoints such as Taiwan and the South and East China Seas."
GEORGE KANAAN, HEAD OF CASH EQUITIES, BARRENJOEY CAPITAL, SYDNEY
"The market has been looking for an excuse to sell off and now they have a real one… They flick the switch when there is uncertainty like this and buyers go on strike."
VASU MENON, EXECUTIVE DIRECTOR OF INVESTMENT STRATEGY, OCBC, SINGAPORE
"History shows that military attacks like this and geopolitical events will pass eventually if there is no major global economic impact. If this is so, markets will rebound after an initial sharp drawdown. Those looking to buy on dips should buy gradually and must take a medium to long-term view."
YUAN YUWEI, PARTNER, WATER WISDOM ASSET MANAGEMENT, HANGZHOU
"The simple strategy is to bet on a spike in inflation.
"That means buying oil and agricultural products, and shorting consumer shares and U.S. growth stocks."
KYLE RODDA, MARKET ANALYST, IG AUSTRALIA, MELBOURNE
"This is very good for gold, very positive for commodities broadly, especially oil. And stocks are going to keep falling in this environment because it's very difficult to price these outcomes."
ROBERT RENNIE, HEAD OF FINANCIAL MARKET STRATEGY, WESTPAC, SYDNEY
"Oil inventories are already staggeringly low and Russia is such a major producer any sanctions that threaten supply would be hugely damaging. From an FX perspective, why the euro isn't a lot lower is a mystery. It should be."
DAN WANG, CHIEF ECONOMIST, HANG SENG BANK (CHINA), SHANGHAI
"A war will trigger a food and energy crisis. Emerging-market countries, especially Turkey, Egypt and Lebanon, are highly dependent on wheat produced in Russia and Ukraine. These countries are fighting high inflation…
"But the war has limited impact on global trade, because apart from oil and natural gas, Russia doesn't have supply chains that can impact the world, which is different from China."