If Ukraine got out of hand, could Fed save stocks?

Geopolitical risk's impact on Fed policy

Market watchers are split over whether the Federal Reserve and other central banks around the world would be able to combat a sharp escalation in Ukraine, should one arise, following Sunday's vote by pro-Moscow Crimea to break away and join Russia.

With U.S. stocks sharply higher Monday despite that referendum, investors seem to have faith that the Fed does indeed have the firepower, said Morgan Stanley Wealth Management Vice Chairman Gary Kaminsky. "The Fed has shown the ability to since 2008 to be able to counter anything with easy money."

Kaminsky, formerly CNBC's capital markets editor, said in a "Squawk Box" interview on Monday, "There's a belief out there, for better or worse … anything that's bad is good for the U.S. capital markets because the easy money policy stays around longer."

In a separate CNBC interview, Barry Knapp—head of U.S. equity portfolio strategy at Barclays—said: "It's not shocking that we'd get to Monday morning and you'd get a little bit of a relief rally. I'm not sure why markets should be all that sanguine about the outlook for this."

(Live blog: Latest developments in Crimea crisis)

In a sign of the rhetoric surrounding the crisis in Ukraine, a leading news anchor on Russian state television warned the U.S. about Moscow's nuclear capabilities, as the White House threatened sanctions over Crimea's vote.

"Russia is the only country in the world that is realistically capable of turning the United States into radioactive ash," Dmitry Kiselyov said on his weekly current affairs show.

(Read more: Kremlin reporter: Russia could turn US to 'ash')

"There's a very hot geopolitical situation in the Crimea in the Ukraine. If that went in an ugly direction that would obviously trigger downside risks to economic activity," Paul Sheard, chief global economist at Standard & Poor's, told CNBC on Monday.

"There are limits to what monetary policy can do if things get out of hand," added Sheard. "I think asking it to deal with a major economic fallout from geopolitical risk is perhaps a bridge too far."

Getting to 'normal' Fed policy

Meanwhile, Ed Keon—portfolio manager at Prudential's Quantitative Management Associates—said that looking at how the crisis in Ukraine might affect the markets is difficult because uncertainty is much harder to gauge than risk.

"The market doesn't know exactly what could happen, never mind assign probabilities ... [so] you're going to get swings on little bits of of new information," Keon said on "Squawk Box."

But he warned that "it's not over yet," so investors should not assume that Monday's move higher will always be the case.

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC. Reuters contributed to this report.