As we awoke last month, we learned that Russia launched a large-scale invasion of Ukraine—one of the most significant geopolitical events in decades. As we reflect on the news, we are primarily concerned about the countless innocent lives that are impacted by this war. Our thoughts go out to any of you that have friends, family or loved ones in the region.
While we can’t predict what happens next or what future headlines will read, we know that this conflict might raise some questions about your portfolio. As in all crises, we apply our evidence-driven approach to planning and investing to help you navigate these uncertain times. It’s important to remember we have worked with you to develop a plan which takes uncertainty like this into account. We’re monitoring several areas including:
- Stock returns: Markets have been trending down since the beginning of the year. Although Russia and Ukraine both have relatively small economies and positions in your portfolio, the primary driver of market performance going forward will be driven by the continued global response to the invasion.
- Volatility: Markets will be significantly more volatile going forward, which means that we should expect to see mid-to-high single digit swings (both big gains and big drops) in the markets over the coming months.
- Inflation: As the West reacts with trade and monetary restrictions, we could see continued supply constraints of oil and gas as well as agricultural and metal supplies. This would lead to higher commodity prices. Higher prices at the pump and potentially at stores could increase the level of perceived inflation, taxing consumers, and leading to lower demand for goods and services.
On a positive note, the U.S. economy remains strong with low unemployment, significant job openings and positive trends coming out of the pandemic. Although the near-term impact to both the markets and your portfolio is uncertain, we know that markets price in new information quickly and tend to recover even from geopolitical situations such as this. The chart below provides some perspective on how markets have performed after various crises:
All of us are here for you. We’ll continue to evaluate how global events may impact your financial plan. Moreover, we’ll continue to proactively seek opportunities to rebalance and make adjustments when appropriate. We look forward to continuing to help you in any way we can.