(Need a break from it? Scroll down to the P.S.)
The invasion of Ukraine is a serious and scary escalation in tensions between Russia, Europe, and the United States. It has been a very long time since the actual talk of nuclear attacks has been considered or discussed in these terms. Before we dive into what it could mean, let’s take a moment to think about the many folks who are suffering and dying as well as the ordinary Russians who will suffer from sanctions, instability, and economic damage. There are many stories of Russian soldiers who are being asked to fight knowing their relatives are amongst the Ukrainian citizens, or Russian soldiers who were told this was just another training exercise and are running out of gas, food, clean water, and warm clothes. Not that there is ever a good side to war, but it is reassuring the Ukrainian citizens are wanting to stand up for their freedoms. I pray they are successful and the loss of life of blood shed can be minimal. I hope diplomacy can end this crisis for all our sakes.
Let’s talk about some possible implications for markets and our economy.
Given Ukraine’s critical pipelines and Western sanctions on Russia, the crisis may lead to higher energy prices, which will trickle down to higher pump and heating fuel costs.1 Not to mention even prior to this invasion energy prices and inflation was already being felt. Sustained price increases could hamper the Federal Reserve’s effort to control inflation, so we’re keeping an eye on that as well.
What could happen in markets?
Extreme volatility, as we’ve already experienced, is very likely. Another correction (or even a bear market) is definitely possible. I believe we will know much more about this conflict in the next few weeks, as we either see peace talks have some success or simply further escalation and talks break down.
What does history teach us about market reactions to geopolitical shocks?
History shows that stocks usually recover quickly from geopolitical crises. I’ll add a disclaimer that the future doesn’t perfectly match the past — but it often rhymes. Let’s take a look at some examples from other invasions and wars.2
Here’s the key takeaway: short-term, markets usually react badly. However, a year later, markets have historically recovered. Will they always? In every case? That’s impossible to say.
But, the study of 29 geopolitical events since WWII shows a general trend toward short-term losses in the first weeks and longer-term gains over months.2A note: “geopolitical event” is a very antiseptic phrase for horrible things like bombings, wars, invasions, attacks, and really fails to encompass the full cost in human misery.
Let’s never forget the ugly truth behind the numbers and what the cost of freedom is. I know it’s not yet Memorial or Veterans Day, but it’s time like these we remember you, who sacrificed your life for our freedoms. My family is humbled by your service to our great Nation, we will never forget you nor the freedoms provided.
We can’t know or control what happens next. We can hope, pray, donate, and speak out.
And we can focus on what’s in our control: Ourselves, our actions and reactions, and our strategies for uncertain times.
Let’s hug the people we love extra tightly today, acknowledge a veteran and thank them for their service, and be very grateful for our blessings.
Be well,
Jeremy Ftacek, AIF®
Ftacek Financial Services, LLC.
www.FtacekFinancial.com
We work primarily by referrals and appreciate your introductions.
Illinois Office: 1000 Essington Road, Joliet, Illinois 60435 | 815-577-9125 | Fax: 815-577-9135
Tennessee Office: 4018 Kings Camp Pass Arrington, Tennessee 37014 | 615-591-2490 | Fax: 815-577-9135
P.S. Tired of war and bad news? Need a break? I’ve got two TED talks for you: 1) A dive into research that shows how our brains might be wired for optimism; 2) How to forge meaning from challenging moments.
P.P.S. Looking for ways to donate to Ukrainians? Here’s a roundup of some organizations doing good work.
1 – https://www.nytimes.com/2022/02/27/business/oil-prices-russia-ukraine.html
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
The Standard & Poor’s 500 (S&P 500®) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are not available for direct investment. The performance of the index excludes any taxes, fees, and expenses.
Securities offered through Registered Representative of Cambridge Investment Research, Inc., a broker-dealer, Member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Cambridge and Ftacek Financial Services, LLC. are not affiliated. This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult a financial professional for your personal situation. Past Performance does not guarantee future results. Please consider the investment objectives, risks, fees, and expenses carefully before investing. For this and other important information, you may obtain prospectuses for mutual funds, any applicable annuity contract, and the underlying funds and/or disclosure documents from your financial processional. Read this information carefully before investing.
