Attention:

All eyes seem to be focused on Washington for the Fed decision. I submit they need to focus on Moscow 'first' to see if there's major escalation of the war, or whether last-minute efforts dissuaded Putin's extreme leanings. After 2 hours of delay, he did 'not' address Russia Tuesday evening, so much if afoot. We do know they designated an 'Immigrant Center' to recruit military 'volunteers' in exchange for Russian citizenship (that's a bonus?).. also Duma authorized limited 'Martial Law' to be declared, so we'll see where that's going but just the speech delay suggests some modification to his pre-planned talk. 

The prevailing choppy market should persist. There is also risk of a sudden upward thrust in the wake of FOMC, 'if' you get tempering from Powell, sort of opposite of his tossing his intended Jackson Hole speech for a Volckeresque assault on moderating policies, as is widely speculated by those who know. 

More notably, risk of another rally or not (really in the days ahead if at all), we emphasize the continued concerns for a 'trap door' opening with another drop or purge, especially in the overpriced 'Grand Dames' remaining not just failing to decline (as most have somewhat), but which can't hope to achieve earning levels that the multiples they sport for next year would justify.

At the moment we can't know what Chairman Powell will say after the FOMC, not Tzar Putin in the morning apparently (if not postponed again). Both matter so I suggest a focus on Moscow first, and we'll deal with Washington later on. Wednesday is a 'trifecta' of speeches: Putin first perhaps, then Fed's Powell, and in-between we'll get President Biden, at the UN General Assembly.

Plus there's very short-term rising geopolitical risk based on Putin's 'sham' of a vote for the East of Ukraine to actually join Russia properly. Nations have of course done this for years (the U.K. for centuries, the U.S. obviously grew to a degree by expansion, but not imaginary out of thin air the way Russia tries at the moment), but in most cases it was 'with the will of the people' whereas it's generally in-opposition to what populations want in this East Ukraine situation.

It also creates the risk of justification for Putin to go from 'special operation', to open declaration of war, as that could bring-in use of nuclear weapons. May not, but that's the worry. And it's crazy because the fallout would head directly into Russia, but who said they were smart enough to use common sense.

One of the few pluses from this potpourri of challenges is fading allegiance of Russia's so-called allies who are nonplussed by Putin's aggressive designs. It is a bit odd as China has it's own expansionist and suppressive plans and live actions now (in certain areas and of course gradually restricting Hong Kong), and India plays both sides with it's relations to the U.K. and democracies, but buys weapons from Russia and engages in military exercises with them. 

Anyway we all know the risks, and of course the S&P retains limited upside as relates to 'actual' (inflation-adjusted) revenues and earnings, with lots of 'risk', in any event - but greater if the war expands rather than contracts- and if went nuclear, well, 20% declines that some speak of (and I don't dismiss) would of course be too optimistic in that kind of tactical move implying calamitous risk.

Again we don't know if anything 'that rough' is going to occur, and maybe the sabre-ratting is an effort by Putin to get Zelensky to the negotiating table, just to gain 'something' (they deserve nothing, but that's not the point) where Putin would attempt to wrap-up the conflict with concessions over the Donbass. For sure that would be an optimistic take, which doesn't seem on his agenda.

In-sum: 

Hard to say the Fed will go higher, faster and for longer, which is the prevailing view among bond and economic players that have been wrong for the most part. However this is tough to gauge.

I personally suggested the much-dreaded full point Funds rate increase would be one way to break things, and in a sense 'get it done'. So I don't know about 'head-snapping' rallies some look for, but oddly enough that might be one way to get there. First let's see if Putin is more wacko (or not) Wed. Stay tuned. 

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