To say February was a volatile month may be the understatement of the year. With ten months remaining, uncertainty appears a likely constant for 2022, midterm elections aside. Russia’s attack on Ukraine has had major global implications. Initial sanctions proved ineffective but global coordination has led to more impactful measures. From a humanitarian perspective, it is difficult to watch these events unfold. If there is a silver lining, the courage and leadership of Ukrainian President Volodymyr Zelenskyy is truly inspirational.

As we enter March, the FOMC is scheduled to meet on the 16th. Consensus for a 50 basis point Fed Funds hike was a possibility not long ago with multiple Federal Reserve members voicing support for an aggressive ‘shock and awe’ hike. Wall Street economists had gone as far as calling for nine consecutive rate hikes. With oil up ~37% year-to-date largely due to geopolitical realities coupled with less energy production, the Fed’s importance has never been more front and center. The long awaited rates liftoff is upon us but the timing, trajectory, and terminal rate remain data dependent. 

Inflation is running hot as lower range income earners see fiscal support wane. With unavoidable daily expenditures such as gasoline spiking, disposable income is falling. The DOE’s Strategic Petroleum Reserve (SPR) should not be viewed as anything but a stopgap to supply shocks. While there is debate on how inflation is measured and which reading is the most accurate, there is little disagreement that inflation has reached 40 year highs. Last night’s State of the Union did not address domestic energy policy as we continue to import from abroad.