Wall Street and the War

Economists noted noticeable nervousness on Wall Street even before the start of the full-scale Russian aggression in Ukraine. The expectation of war, uncertainty and potential risks to the global and US economy forced the market to fluctuate, reacting to the news. The indices then fell rapidly, then abruptly took off. One of the first to react to the invasion, according to American economist Jonas Schaende, was the energy sector.
“Which could, of course, be seen as Russia, which is associated primarily with the oil sector, with the gas sector. The prices of these commodities on the commodity exchanges, of course, rose – they rose and began to include an element of nervousness and fear. It was in the early months, but then the American president got involved, started selling the strategic reserve and releasing it into the market, and of course that stabilized the markets, and as the fears eased, oil prices also fell. ”
During the year, the reaction of the markets to the war in Europe reflected the evolution of the situation on the front lines and the diplomatic steps. But after the outbreak of hostilities, according to Vadim Volos, vice president of the NORC research center at the University of Chicago, he was already more neutral.
“And in principle, during the year, except for some days when there was an escalation, for example, when a Ukrainian missile flew into Poland and there was a feeling that the conflict was now going to escalate. expand to another country and NATO. Then the markets reacted strongly negatively, but in principle it can be said that the reaction of Wall Street to this conflict during the year was, on the whole, extremely neutral. And, of course, that does not mean that it will be her tomorrow, that is to say that it remains a potential source of instability.”
During the year, shares of companies of the military-industrial complex rose on the stock exchange. First, the actions of giants such as Lockheed Martin, which produces, among other things, munitions, ballistic missiles and anti-missile systems. And this created, according to Vadim Volos, positive trends for the defense sector last year.
“The defense sector, which grew by 8% last year. It’s not just because of the war in Ukraine. Also because of China, because NATO allies started ordering more US weapons and aerospace products. Well, nevertheless, it was the fastest growing sector.
In 2023, the sharp decline in economic growth will be widespread, affecting 95% of advanced economies and 70% of developing countries, according to World Bank projections. The trend, according to the report’s authors, is due to inflation, reduced investment and disruption caused by Russia’s invasion of Ukraine. The United States, in this sense, has been less affected by supply chain disruptions, as it is less dependent on supplies from Russia or Ukraine than the European Union. But armed aggression has undoubtedly been one of the factors in the growth of inflation on a global scale.
“The US economy is not that open to the Russian economy,” explains Jonas Schaende, “so there weren’t as many risks. I think it is already obvious to everyone that the most vulnerable was the economy of Europe and, in the first place, countries like Germany.
According to experts, US financial assistance to Ukraine has not become an “unbearable burden” and, against the background of other government spending, it has not fundamentally changed the alignment of the state budget , says Vadim Volos, vice-president of NORC.
“Yes, the aid to Ukraine has been important. But if you look at the percentage of the US budget and what America spends on, say, pension payments, health insurance, that’s still a drop in the ocean for American size. It doesn’t make Americans poorer,” he said.
Obviously, in 2023, the situation of the world economy should remain uncertain and will depend on the continuation of the war in Ukraine. Economists do not exclude that even after the end of the war, its consequences will be felt for a long time on the world economy.