Market Note (Special Edition) – November 21, 2024

By Hightower Great Lakes on November 21, 2024

Russia/Ukraine Escalation: Worry or Not to Worry?

Tuesday morning, Ukraine fired U.S.-made ATACMS missiles toward Russian weapon arsenals, the first time such an attack has taken place since the beginning of the war on February 24, 2022.

The attack comes two days after the Biden administration gave Ukraine the green light to use long-range American weapons against Russia. Ukraine President Zelensky stated in a press conference on Tuesday that “Ukraine has long-range capabilities.

Ukraine has long-range drones of its own production. We now have a long ‘Neptune’ (Ukrainian cruise missiles) and not just one. And now we have ATACMS. And we will use all of this”.[1]

On the same day of the attack, President Putin adjusted Russia’s nuclear doctrine. Previously, the doctrine stated a nuclear response may be warranted if an attack jeopardized Russia’s “very existence”.

Now, that same doctrine states nuclear weapons may be used if the country receives an attack that “creates a critical threat to the sovereignty and or territorial integrity” against Russia.

The doctrine also states that any attack on Russia will be considered an attack by all members of a coalition or alliance of which the attacking nation is a member.[2]

In our opinion, the timing of the “green light” by the Biden administration comes at an interesting time, with only 61 days until Donald Trump’s inauguration.

November 20, 2024, marks the 1,000^th day since the Russia/Ukraine war began, and escalations of this magnitude to come at this time make us raise an eyebrow on the intent behind the decision.

To note, the U.S. giving the go-ahead to Ukraine was likely in retaliation to Russia deploying North Korean troops into the war. The U.S. only authorized Ukraine to use its missiles in the Kursk region of Russia, where North Korean troops are fighting.

Market Reaction

Stocks opened down and bonds higher as trading opened Tuesday morning. Throughout the day, as information was rationalized, stocks regained, and bonds retracted.

Experts have noted that there is a very slim chance of nuclear use, and public adjustments to policy are seen as more of a posturing move rather than a signal of intent.[3]

In our view, investors should step back and focus on the current market and economic backdrop in the U.S. In this week’s Weekly Wisdom, we shared insights into the robust, ever-spending U.S. consumer.

With earnings likely to grow 8-10% this year, GDP expanding above 2%, and over $2 trillion in infrastructure spending still working through the U.S., there is a lot to be excited about.

As noted in this week’s Market Note, we believe bond yields have backed up due to hopes of stronger growth under the Trump administration, not higher inflation.

In Trump 1.0 from 2017-2020, the consumer price index averaged 1.9%, the producer price index averaged 1.77%, and personal consumption expenditures, the Fed’s preferred inflation gauge, averaged 1.58%. Inflation was not a concern during Trump’s first term, and we do not believe it will be a concern in his second.

In two months, a new administration will be in office deciding U.S. foreign policy. In the meantime, focus on the strong U.S. fundamentals.

Chart 1: Markets Opened Down Tuesday Morning, and Rallied Throughout the Day[4]

Click here to read last week’s Market Note (11/19).

Disclosures

Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors.

All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

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[1] Source: CNN. As of November 19, 2024.

[2] Source: CNN. As of November 19, 2024.

[3] Source: FactSet. As of November 19, 2024.

[4] Source: FactSet. As of November 20, 2024.