CBS News Blames Ukraine for Inflation, but Investors Aren’t Buying It

Stocks opened higher this morning amid lingering tensions between Russia and Ukraine. Russian military forces crossed Ukraine’s eastern border on Monday, taking the Donbas region. Pro-Russia separatists, who make up the majority of Donbas, welcomed the Russians with open arms.

Russian President Vladimir Putin was then given permission by the Russian Parliament to use the country’s military forces abroad yesterday, which NATO officials did not take kindly to. In response, President Biden levied sanctions against several major Russian banks and oligarchs.

The sanctions themselves – mostly bans from doing business in America – were far less potent than many analysts had expected. Last night, it also seemed as though Russia had stopped its advance into Ukraine.

This caused futures to rally in premarket trading today. Shortly before noon, however, stocks headed lower again following a cyberattack on Ukrainian government and bank websites. After the attacks, the Biden administration went so far as to say that a full-scale invasion of Ukraine could occur within 48 hours.

“While uncertainties remain, our work shows that historically military/crisis events tend to inject volatility into markets and often cause a short-term dip, but stocks tend to eventually rebound unless the event pushes the economy into recession,” said Eylem Senyuz, Truist’s senior global macro strategist.

“Investor sentiment also suggests the bar for positive surprises is low.”

War in Ukraine wouldn’t push the US economy “into recession” (as Senyuz said) all on its own. However, persistently higher oil prices as a result of that war might do the trick.

JPMorgan’s trading desk released a note around 11 am EST today predicting that oil would average $110 per barrel in Q2 this year. Right now, a barrel of brent crude is trading for around $91.65. A jump to $110 would be potentially disastrous for the economy.

JPMorgan’s prediction shouldn’t be taken at face value, though. This is the same trading desk that leaked a Consumer Price Index (CPI) whisper the day before the official January CPI numbers were released. Stocks rallied in response that afternoon.

Then, the CPI data came out and revealed that JPMorgan’s “whisper” was dead wrong. Stocks cratered as sentiment flip-flopped.

This time around, however, the Wall Street bank probably has it right. Sanctions against Russia should only make energy costs climb through Q2.

And without war in Ukraine, oil could still hit $100+ per barrel thanks to inflation alone.

But according to CBS News this morning, investors can blame Ukraine for all that inflation. Even the 18 months of rising energy costs that predated the Ukrainian border crisis.

“The US economy has been hit with increased gas prices, inflation, and supply-chain issues due to the Ukraine crisis,” said the news outlet on Twitter.

Numerous users responded to the tweet, saying “literally no one believes that” while observing “how far [CBS] has fallen as a news outlet.” One user asked if CBS “felt any shame.”

Thankfully, it seems the perma-bullish masses may finally be waking from their slumber. Investors know that something’s amiss, especially with a Fed rate hike looming in March.

CBS won’t be the first news outlet to try and spin the US’s economic problems as a temporary issue. Others will undoubtedly follow suit. But, as stock prices have shown over the last week, nobody’s really buying it anymore.

So, tempting as it may be, “buying the dip” right now could be a little premature. Putin hasn’t called off the dogs just yet. And until he does, there will be potential for additional, sudden losses as Fed Chairman Jerome Powell prepares to raise rates.


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