The stock market, real estate and United States employment had been hitting new highs. Unfortunately, nothing goes up in a straight line forever. There are always black swan events that strike fear and concern into the financial and housing markets, along with the overall economy. Inflation and supply chain disruptions cause concerns. Fear of a war between Russia and the Ukraine has spooked Wall Street, causing selloffs.
The New York Times ran a headline, “In Phone Call, Biden Warns Putin of ‘Severe’ Costs of Invading Ukraine,” and wrote, “The one-hour call came hours after the State Department ordered all but a ‘core team’ of American diplomats to leave the embassy in Kyiv amid concerns of an imminent Russian attack.”
The Wall Street Journal reported, “U.S. officials are warning that Russia could be about to attack Ukraine. For many citizens in this embattled country, the assault has already begun. Ukrainian officials say that Russia, which has positioned more than 100,000 troops around three sides of Ukraine, is stepping up a destabilization campaign involving cyberattacks, economic disruption and a new tactic: hundreds of fake bomb threats.”
Tensions are running hot, as a potential war between Russia and Ukraine seems likely to happen. There is heightened worries that NATO, the U.S. and other countries may be drawn into the conflict. Russia has enhanced its relationship with China, and since America relies upon the country for much of its goods, it’s reasonable to believe that there will be supply chain disruptions.
The Dow Jones Industrial Average, a benchmark for the financial markets, plunged more than 500 points, or 1.4%, after the Biden administration said it would be ready to respond if Russia invades. The S&P 500 and Nasdaq—two other bellwether indices— ended the day down 1.9% and 2.8%, respectively due to the uncertainty.
We’ve been the beneficiary of a booming job market. It’s possible that a conflict could cool it off. CEOs and corporate executives abhor the unknown. They want clarity and certainty. Management doesn’t want to launch new ventures, build new facilities or hire more people if the economy falters or worse.
The fear of the unknown makes business executives hunker down, and wait things out until they get a sense of where everything is headed. If there is a real or even perceived fear of a war in Eastern Europe, along with high inflation and supply chain disruptions, it’s logical that management will hold back on hiring. Human resources wouldn’t want to hire just to have to let people go if the economy starts sliding downward, in response to an armed conflict. In addition to hiring freezes, businesses may start firing workers to preemptively cut costs, in case things take a turn for the worse.
Employed job hunters may hit the brakes on their search. They’ll figure it’s safer to stay where they are for now. If circumstances improve, they’ll feel that they can always restart their job search. Remembering what happened during the financial crisis in 2008 and during the dark early months of the pandemic, people won’t want to be the last one hired at the company and then become the first victim to be let go. If stocks fall further into a “bear market,” going down 20% or more, the fear could snowball into more layoffs, as panic may take hold.
There is hope that the two sides could come to an amicable agreement without the need for war, violence, death and destruction. Until that happens, be prepared for some rocky times ahead.
Source: Forbes
