As earnings season gathers pace, Fed monetary policy and the Ukraine-Russia crisis have been in the spotlight in recent weeks, with any significant development impacting market sentiment – ​​and that’s a long way off. to be finished…

US inflation outlook shows it could head even higher than a 40-year high

Investors are still watching key inflation indicators in hopes of better anticipation of how quickly Fed officials will react in an effort to curb inflation, which hit a 40-year high earlier this year. Every speech from the central bank will be scrutinized by the market to gauge its willingness to vote for a half-point hike at the next meeting.

Oil prices may continue to climb above $100

Fears over the outcome of the Russian-Ukrainian conflict are also impacting the inflation outlook, as tensions in the region support oil and other commodity prices, which are an important component of inflation.

Oil prices are approaching $100 a barrel for the first time since 2014, due to a potential lack of supplies from Russia and the comprehensive measures that could be taken in response to Moscow’s violation of international law. For Commerzbank, it’s only a matter of time before it hits the $100 mark. Standard Chartered economists believe oil prices could reach levels as high as $112-115.

This week, geopolitics is clearly the main driver of the market

Putin has officially recognized the separatist regions of Donetsk and Luhansk in eastern Ukraine, triggering a military escalation and fueling risk aversion on indices around the world.

As Putin’s troops invade rebel regions of Ukraine, officials around the world are already considering implementing economic and financial sanctions against Russia, which will have a significant impact on Russia’s economic relations with other countries. other parts of the world.

Gold prices could strengthen if the situation in Ukraine escalates

Some analysts believe that market participants have yet to price in a full-scale military conflict in Eastern Europe. If the situation worsens, gold could become a sought-after financial asset for those looking for a safe-haven investment to build a more resilient portfolio, which is exactly what gold represents.

The yellow metal recently hit a multi-month high, but it may still have room to grow with growing uncertainty, as well as market volatility and pullbacks. Not to mention that gold is also highly sought after in inflationary environments. While rising US rates may create headwinds for gold, past tightening cycles show that federal funds rates have not been raised as aggressively as originally expected and their effect on gold could be limited.