In the third episode of the TV series “Landman,” lead character Tommy Norris explains that getting oil out of the ground is the most dangerous job in the world. “We don’t do it because we like it; we do it because we have run out of options,” he says. He also explains that oil is present in nearly everything, including artificial heart valves, cosmetics, tennis rackets, cell phone cases, soap, fishing boats, antihistamines, garbage bags, clothing and plastics.

Geopolitical tensions have once again put a spotlight on the price of oil, as well as its sources of production, refining and transportation. As a result, forecasts for gross domestic product growth, not only in the United States but worldwide, have come under pressure. The consensus is that higher oil prices will exert a downward force on economic growth and result in slowing economies across the globe.

The bond market’s assessment of this situation is interesting. When the economy looks like it will be slowing down, investment managers tend to establish a more defensive posture by purchasing U.S. Treasury bonds, which brings about declining interest rates. However, that hasn’t happened. In fact, the opposite has occurred – interest rates (other than the federal funds rate) have been rising. Why? As best we can tell, the market is more concerned about the effect that rising oil prices will have on inflation. The longer inflation is expected to remain above the Fed’s target rate of 2%, the more bond investors need to be compensated for holding longer-term bonds.

Another factor that could be contributing to higher longer-term interest rates is continued growth in Federal deficits, adding to an already high debt load of outstanding Treasury bonds. In that case, interest rates need to go higher to attract investors to purchase even more of a particular asset class.

Rising interest rates put downward pressure on bond returns. At the time of this writing, most popular bond index returns were negative for the year. The stock market has seen a rapid rotation away from growth stocks toward value stocks. The S&P 500 is down 6.96% year-to-date, with the S&P 500 Growth Index down 11.11%. However, the S&P 500 Value Index is only down 2.16%. Dividend stocks are the real winners so far. While there isn’t a popular index tracking these stocks, our own dividend-focused strategy is up about 9% year-to-date.

As these trends show, artificial intelligence and data center construction are no longer the top market headlines (for now, anyway). Rising oil prices and the choke points of its distribution, along with the decline in gold, silver and bitcoin prices, have instead taken center stage.

Long-term investment success is supported by the ability to move through all types of market and economic events and conditions. A portfolio that has been allocated to deliver on future goals should also provide peace of mind during times of volatility. This helps avoid the temptation to make changes in response to current disruptions.

It is enjoyable when asset values are moving higher, but not so much when the opposite occurs. Over the last few weeks, I’ve heard financial news networks ask commentators what they have done to reposition portfolios in the current environment. Some respond by saying they are buying bonds to be defensive, while others are selling bonds because they expect inflation to remain higher. Others are selling stocks because they think the Fed won’t reduce rates this year, while some are buying stocks because they think the Fed will reduce rates two more times. The point is that nobody knows.

My answer to that question posed by network hosts would be to ask questions of my own: Has there been any change to your long-term goals? Has there been any change to your risk/return profile? Has there been any change to your timeline? Has there been any change in your family status or taxation? These questions determine whether an investment allocation should be updated, not the ebb and flow of disruptions going on around us.

As always, thank you for your business and confidence in Bell.

Greg Sweeney is the chief investment and economic strategist at Bell Institutional Investment Management. He guides the investment strategy, and this outlook is his perspective on the latest market trends and what they could mean for investors. Any views, strategies or products discussed in this article may not be appropriate or suitable for all individuals and are subject to risks.