The Russia-Ukraine Conflict: How It Might Impact the Markets & Your Portfolio

Anyone watching the news is acutely aware of the conflict gripping the world surrounding Russia’s unprovoked invasion of Ukraine. Besides the implications for world peace and the horrible suffering this inflicts on the Ukrainian people, there are implications for the financial markets in general, and your own portfolio specifically.

Deborah A Silva – Financial Advisor of The Lee Group of Wedbush Securities says, “The conflict between Russia and Ukraine has magnified market volatility this year. It’s natural to be fearful and have anxiety over what might happen to your investment portfolio. While the fear is normal, don’t let the emotion of that fear guide your decision making.”

Deborah offers some very sound advice for investors. As we’ve seen in countless other situations involving market turmoil, investors who make rash investing decisions driven by panic often regret these decisions down the road.

An interconnected world

As investors have seen time and time again, financial markets are global. Russia’s invasion of Ukraine certainly reinforces this. Even before the onset of this conflict, markets have been volatile in 2022. This situation has exacerbated this volatility.

Beyond the potential for an escalation of this conflict to other parts of Europe, this situation is having an impact on a number of industries and sectors of world commerce.

Potential market and sector impacts

Certainly, the conflict has already had at least a short-term impact on the supply and the price of oil. Oil prices have surged since the onset of this crisis and show no signs of pulling back in the near term.

The price of oil and other supply chain issues arising from this conflict have served to fuel inflation that was already at historically high levels. This inflation has impacted the price of automobiles, food on the grocery store shelves and the price of other essential goods and services. Inflation is inherently bad for the economy and for the markets.

Another area of concern that might be driving some of this volatility is the fear of cyber-attacks by Russia in the wake of sanctions imposed on their economy by the United States and our allies.

One area where the impact might be somewhat positive is on the interest rate front. Coming into 2022, the Fed had indicated it would raise interest rates several times over the course of the year. There are indications that this might be scaled back a bit due to the crisis in Ukraine. This would keep interest rates lower than they might have been. This could have a positive impact on a range of sectors including housing.

Should Investors expect continued volatility in the markets?

Whether or not we see continued market volatility remains to be seen. This will depend on a number of factors, not the least of which is the resolution of the situation in Ukraine, plus any lasting impact on the economies of the countries most impacted.

Chris Mone – EVP, Head of Wealth Management of Wedbush Securities says, “Given the geopolitical instability unfolding with Ukraine conflict, the recent market volatility and fear of a widespread increase in cyber-attacks, we are encouraging our clients to avoid reacting impulsively to short-term volatility and to stay focused on their long-term personal objectives and plan. Our advisors have been proactively reaching out to clients to help them understand the impact of these global events, as they relate to economic and market risk, and ensure they are well positioned to achieve their long-term objectives.”

This is sound advice from Chris.

Overview of Potential planning implications for investors and clients

It’s important to remember that geopolitical events dating back to 1970 have rarely had a lasting impact on the markets. In fact, on average, the S&P 500 was higher a year later in spite of the short-term impact of these events. A sense of perspective is always important for investors, perhaps it is never more important than during a situation like this.

Silva suggests, “You’ve created a thoughtful investment plan and strategy with your advisor. Talk to your advisor about what you are feeling. In most cases, your advisor will counsel you to “stay the course.” And remember, time IN the market is more important that TIMING the market! Talk to your advisor!”

We urge you to contact your Wedbush advisor to discuss your situation in the wake of this market volatility.

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These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.