Halyard’s Weekly Wrap – 02/25/22

So…What a quiet week in the capital markets!  As of now, bond yields have drifted higher and the yield curve flatter as investors contemplate the Fed’s upcoming rate hikes.  Since last Friday the 2 year US Treasury Note yield has risen 14 basis points to round out the week at 1.61%, while the yield to maturity on the 10 year US Treasury Note rose 6bps to close Friday out at 1.99%.  Stocks, as measured by the S&P500, rose for the week – closing around 60bps higher.    Let’s digest that for a minute.  Wait, Russia invaded the Ukraine on Thursday.  Putin made his motive clear – demilitarize the Ukraine.  The shock that move sent through the capital markets found the S&P down nearly 3% that day making its peak to trough (from Jan 4^th high) down 14%.  Safe haven assets rose – gold, and US Treasury Bond prices in particular.  The money market space removed much of the probability of a 50bps move higher in fed funds.  World leaders responded with sanctions and the Ukraine is fighting back.  Apparently, that was enough for risk assets to rebound and put Putin’s actions in the review mirror.  The S&P500 is up more than 6% from the low print this week.

To be fair, the stock market has been selling off since the beginning of the year and was down mid-single digits pre-invasion.  Perhaps the Putin’s move to eliminate weapons on his western border was already priced into the markets.  We remain skeptical that risk assets are set to rally further.

In Fed speak, both Federal Reserve Governor Waller and Fed Kansas City President George reiterated that they would like to move sooner and faster than previous hiking cycles.  Are stocks ready for that?