Lara Rhame on the Ukraine conflict, macro implications

Chief U.S. Economist Lara Rhame shares her initial reactions to the Russian invasion of Ukraine and what it means for the global economy.

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February 25, 2022 | 10 minute read

About this episode
Episode was recorded on 2/24/2022

Investment Research Director Kara O’Halloran sits down with Chief U.S. Economist Lara Rhame to discuss the Russian invasion of Ukraine on February 24, 2022. The two discuss economic impacts, both domestic and globally, potential moves by the Fed and the ECB, and Lara’s initial hunch on what this could mean for the longer-term economy as we continue a trend toward deglobalization. While uncertainty continues to linger, Lara maintains the view that the U.S. economy remains on solid footing.

Transcript excerpt:

Kara O’Halloran (00:05):

Welcome back to Fireside, a podcast from FS Investments. My name is Kara O’Halloran. I’m a director on our investment research team here and I am currently sitting with our Chief US Economist, Lara Rhame.

Kara O’Halloran (00:17):

Lara, I am going to dive right in. It is midday on Thursday February 24th. We all woke up to news this morning that Russia had invaded Ukraine, something that had obviously been a possibility for a few weeks and of course, the first thing we want to do is really just acknowledge the gravity of the situation and first and foremost, there is a very real human toll. So while we are going to stick to some of the market and economic impacts, our hearts go out to anybody who has been impacted or has had family impacted by the events of the last 24 hours.

Kara O’Halloran (00:48):

Things are changing really quickly and evolving really quickly so we’re going to talk about some of our initial thoughts on the initial market and economic impacts. Taking down a few of the things that we’ve seen in markets so far, equity’s opened down pretty significantly this morning. Seen them pair some of those losses in a typical flight to equality. We saw the 10-year yield drop about 15 basis-points. Again, it’s risen some since. We’ve also seen the Nasdaq up on the day, almost hearkening back to that COVID trade of tech being a safe haven. But the big news, I think, also, is oil prices crossing $100 for a barrel for the first time since 2014. So a quick list of the market impacts that we’ve seen but Lara, I want to know your initial thoughts right off the bat, gut reactions to what’s going on.

Lara Rhame (01:38):

Yeah. I mean the humanitarian impact, obviously, comes first. Our hearts and prayers are with anyone who has family who’s in danger this evening or is in danger this evening. My husband is of Ukrainian heritage. I know that there are relatives there and we’re all just … I think that has to be top of mind.

Lara Rhame (01:58):

When we really think about the direct economic impact for the US economy, just that old adage of when things are happening of this nature, you want to safeguard your home territory. And think about what impact we’re going to see to the US, the reality is that the direct export market interaction with the US and Russia is really very limited already. We have heard President Biden discuss Draconian sanctions that are coming. We still don’t have a lot of clarity about that. But right now, Russia only accounts for one percent of US imports and less than half a percent of US exports. So unlike China, Canada, these big trade partners, even if we just stopped trading with Russia today, that is not a big impact on US manufacturers or US producers.

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Kara O’Halloran, CFA

Director, Investment Research

Lara Rhame

Chief U.S. Economist + Managing Director

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