Obsidian Market Update 3/3/2023
The War in Ukraine: One Year In
February 24, 2023 marked the one-year anniversary of the Russian invasion of Ukraine—a human tragedy first and foremost. Since then, countless articles, opinion pieces, position papers and podcasts have summarized, analyzed and hypothesized about the motivations, strategies, strengths, weaknesses and potential outcomes of the parties involved.
The question today is: Has the war and/or the funds the U.S. has spent (or pledged) to support Ukraine effected the U.S. economy? We aren’t geopolitical strategists, but we are financial professionals who closely watch the effect the war has today (and may have in the future) on the U.S. and world economies. Today we look at several issues: government spending, commodity prices and inflation.
U.S. Aid by The Numbers
The following chart from The Council on Foreign Relations, summarizes U.S. aid sent to Ukraine between January 24, 2022 and January 15, 2023.
In addition, the U.S.:
- Has admitted over 267,000 Ukrainians to the United States.
- Has administered or expanded more than 2,000 sanctions and 375+ export control Entity Listings.
- Will disburse the additional $9.9 billion through the Department of the Treasury and U.S. Agency for International Development.
- As of 2/24/23, has committed another $2 billion to Ukraine under the Ukraine Security Assistance Initiative.
The War’s Effect on Agricultural Commodity Prices
According to the U.S. Department of Agriculture, between October of 2021 and April of 2022, the prices of agricultural products skyrocketed: wheat prices by 110%, corn and vegetable prices by 140% and soybean prices by 90%. Since the implementation of the Black Sea Grain Initiative, however, corn and wheat prices have recovered somewhat, but the Initiative will expire in mid-March of this year.
The War’s Effect on Inflation in the U.S.
Directly attributing the inflation rate to the war in Ukraine is difficult, if not impossible. In the words of Patrick T. Harker, President and Chief Executive Officer of the Federal Reserve Bank of Philadelphia, there is no single cause for inflation. It is a “confluence of events: a global pandemic, a war in Europe and . . . fiscal and monetary policy decisions [that] have combined to limit supply and boost demand.”
As we’ve noted in past issues of this newsletter, the current combination of inflation and high employment is unique. Muddying the waters further: While consumers continue to increase their spending (up 1.8% in January of 2023), the Institute for Supply Management’s Manufacturing Purchasing Managers Index (PMI) fell to its lowest point since May 2020: 47.4. (A number below 50 indicates a contraction in the manufacturing sector.)
The next meeting of the Federal Open Market Committee is March 21 and 22. Rest assured that we are monitoring its actions, negotiations regarding the U.S. debt ceiling, the situation in Ukraine and multiple economic indicators. If you have any questions or concerns about your portfolio as we navigate uncharted waters, please don’t hesitate to contact us.
IFS Clients: Welcome to the Obsidian Family!
Obsidian recently welcomed into our Obsidian family three financial professionals—Jay Wilen, Anne Heydrick and Jill Dunagan—and clients from Integrated Financial Strategies, LLC (IFS.
Before doing so, we asked the same critical questions we advise clients to ask when considering a business acquisition:
- Do their values and culture match ours?
- Do their practices and processes integrate with ours?
- Do they get positive results for their clients?
- Would we trust them with the financial future of our clients?
The answer to all four questions is an enthusiastic Yes!
Obsidian’s values—integrity, transparency, excellence, professionalism, and genuine care for each client—are critical to both your success and ours, and Jay, Anne and Jill are as committed to these values as we are.
You’ll be hearing more in the coming weeks about how this merger will affect you. Spoiler alert: Outside of account number adjustments for IFS clients, you’ll see minimal change. In the meantime, we hope you will get to know us, and contact us with any questions. Welcome to the family!