Russia Invades Ukraine and Shocks Markets

In this week's Macro Insight I discussed...


RUSSIA INVADES UKRAINE

Markets last week were once again dominated by geopolitics and everybody’s worst fears were realized on Wednesday night as Putin invaded Ukraine as the US had been warning for weeks.

Asset prices had enormous swings with equities and crypto knee-jerking lower and commodities such as Oil, Gold and Wheat exploding higher.


BUY THE INVASION?

Looking back at previous wars, it typically pays to “buy the invasion” when you look 12- 18 months out. In which case we shouldn’t be surprised to see stocks rally a bit now that military action has begun.

Last week all US indices recovered their losses with Europe and EM lagging. Fed’s Powell to speak this week, will give markets clarity on level of aggression with rate hikes in face of geopolitical uncertainty.

SHORT TERM PUT BUYERS KEEP DEALERS IN SHORT GAMMA TERRITORY

Despite some short gamma rolling off last Friday, markets remain in short gamma territory as clients focus on short term put options to navigate geopolitical headline risk.

On SPX 4100/4205 should provide strong supports and 4450 call wall resistance.

Above 4450 would be required for a more sustainable sell- off in VIX as dealers would become much longer volatility and some more equilibrium should return.


EXTREME STRESS IN ENERGY MARKETS

Metals and mining continues to lead the pack as does energy this week after the wild commodity moves. Banks took a breather as yields pulled back on risk off, would expect that to recover in due course, I rolled my KRE March calls in April at the end of last week.


Filmed on on Tuesday 1st March 2022.


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