Timely and Relevant News: SWIFT Sanctions and Russia Central Bank Restrictions

The U.S. has cut off major Russian banks from the SWIFT secure messaging system - severely limiting the banks’ ability to participate in international transactions, while advancing measures that would make it difficult for Russian’s central bank to outflank sanctions to support its financial system.

The sanctions’ were immediately felt with offshore trades in the Russian ruble declining sharply, a downgrade of Russian debt by one rating agency from investment grade to junk status and lines forming at Russian ATMs to withdraw currency.

The economic pressure will likely push Russia toward recession and will put considerable pressure on the stability of the Russian banking system.

The sanctions have also put pressure on dollar funding markets and central banks may need to step in to help provide liquidity. The European Central Bank (ECB) governing council is meeting on March 10th and will likely communicate a less hawkish stance as rising risks from the East could put a damper on Western Europe’s growth path. Within the U.S., the Fed will be less likely to “shock and awe” the market with an overly aggressive hike on March 15-16th.

We continue to remain more cautious on European equities and expect sustained upward pressure on commodity prices, possibly keeping inflation levels elevated into the back half of the year.      

While the U.S. is making a significant step in supporting Ukraine, it does little to mitigate the humanitarian crisis on the ground. Our hearts and prayers go out to the victims of this war and aggression.

Our Covenant Wealth Strategies investment team is closely monitoring the dynamic situation. We are making appropriate tactical shifts in keeping with our strategies and doing tax loss harvesting where appropriate. It is important to not lose sight of your long-term goals and to maintain your perspective in the midst of market volatility. 

If you have specific questions related to your own investments or financial planning needs, we welcome you to contact us to set up time to discuss how we can assist you. 

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All index data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.