Experts say that the conflict between Russia and Ukraine will "test" American consumers on several fronts

Volatility in oil prices is likely to have the greatest impact on the travel and transportation sectors.

Experts say that the conflict between Russia and Ukraine will "test" American consumers on several fronts

Wall Street continued its five-day slide Thursday as it grappled with images of Russian soldiers marching in Ukraine, with black smoke rising from its skylines.

CBOE Volatility Index (the Chicago Board Options Exchange's market's fear gauge) jumped more than 4.5 percent after jittery investors attempted to play out the effects of the invasion.

The Dow Jones fell by approximately 500 points as President Joe Biden spoke to the nation. This is a drop of 1.5 percent. The broad-based S&P 500 fell by 20 points, or about 0.5%. The Nasdaq climbed 124 points in the opposite direction.

Markets broadly recovered at the end of trading day, with the Dow Jones Industrial Average and the S&P 500 all moving in positive territory.

"Nobody knows how comprehensive this will be," stated Sam Stovall (Chair Investment Strategist at CFRA Research).

The Nasdaq was an exception among the three major indices. It recovered from a morning plunge that sent the tech-heavy index down into bear market territory. Before a rebound that brought it back to roughly the same level, the Nasdaq fell 20 percent from its November peak.

Analysts suggested that traders believed that the combination of economic volatility with an energy price shock would be enough to convince Federal Reserve officials to reduce interest rate increases. This is because lower borrowing costs can have a greater impact on fast-growing businesses that depend on debt for expansion.

Ross Mayfield, an analyst in investment strategy at Baird, stated that the central bank is limited in its ability to balance rising inflation with more expensive energy. He said that if this is a significant event that could seriously hinder economic growth, they may be less aggressive with tightening. "This could not have occurred at a worse moment for the Federal Reserve."
As investors looked for safe havens, bond yields fell and metal prices rose. The benchmark Brent price rose to over $100 per barrel, despite oil already being high. Mayfield stated that energy companies will be one of the few sectors to benefit from the upheaval, as long as oil prices and demand remain high.

Although negative sentiment was prevalent across all sectors, analysts stated that those who are subject to high energy costs such as travel and transportation will be most affected by the rise in oil prices. The rapid rise in oil prices could also impact consumer discretionary brands, as Americans will pay more to fill their cars.

Higher energy prices have an impact on consumer discretionary spending. Mayfield stated that while the consumer is quite strong, it eventually begins to be challenged.

According to market observers, whipsawing Wall Street might be able to entice small investors into selling but it would be a mistake.

"Historically, this kind of thing in terms market sell-offs or recoveries is quite brief," stated Dan North, senior economist at Euler Hermes North America. He said that the average sell-off period has been around 15 days and recovery takes approximately the same timeframe since World War II. He predicted that it would feel "bad" but not last as long.

Stovall agreed, stating that investors should be focusing on long-term goals such as saving for retirement and not reacting to volatility in the short term. He said that although military surprises can throw the market off balance in the short-term, they have been more common reasons to buy than bail. Don't let your emotions become your portfolio's worst enemy.

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