The market is, once again, mispricing the severity of Ukraine's invasion/war by Russia. Focusing on the Federal Reserve's small 0.25% cash rate rise due in March 2022.

Chart 1

Chart 2

The market is beginning to misprice, once again, the severity of the conflict in Ukraine, which is the ongoing invasion by Russia,  however, what  the Futures market is pricing, is Jerome Powell the Federal Reserve governor playing down interest rate hikes and reiterating the tiny 0.25% hike due for March 2022, as noted in this post; to offset inflation via a history lesson, anything less than 2% will have very little effect.  This denying or allowing inflation to become a hidden tax, yes, I am speculating here, but the Fed needs to gain a hold of inflation if it is indeed to maintain a credibility by assisting main street, I know, we're all cynics of financial institutionalism, but one lives in hope.   Regardless, the sucker punch will be, once again, a Russian 'incident' so far the destruction of Ukrainian cities is now spilling over close to NATO country's that border with Ukraine, such as Poland, in its recent rocket attack on a Ukraine rocket base.

The Chart 1 above shows the 10 YR now rallying in lieu of the looming Federal Reserve interest rate, bouncing off 2.00% February 11th 2022, now trading at 2.044%, overlaid with safe haven/s, such as the Swiss Franc and Gold, which have been sold off.    

Another way of looking at how dependent the market is on Fed liquidity is the VIX (volatility index, Chart 2) in comparison to the 2020 pandemic, which a virus came from left of center and floored everyone, leaving a wreaked economy and inflation in its wake.  The Fed, at the time, pumped $700 billion a month into Wall Street, to 'stabilize' the markets and everyone got vaxxed up (including I).  The Ukraine invasion with its very drastic sanctions on Russia and the spectra of a new cold war and inflation gobbling up incomes, with food and utility bills about to blow up into a hyper inflated state.  Are we assuming all is well?   Mind you, the VIX, when looked at carefully, is still telling of an underlying concern that something big could hit the market again.   The drawn vertical trend line (mine), as that possibility.   

Key points that risk aversion lurks:

Putin's war machine may just set off a miscalculation of one of its major weapon systems.  

The blockage of Ukraine Black Sea Coast and test for NATO?

and

a new Covid variant