Keep Calm, and Have Faith in Your Plan

Geopolitical conflict, like what we’re seeing with Russia’s invasion of Ukraine, can cause concern among investors. As a long-term investor, Bell Bank Wealth Management’s best advice during any geopolitical conflict is to stay the course.

Investing is a matter of navigating many uncertain and interconnected elements. We concentrate on the elements we can help you control, by focusing on your personal financial plan to monitor asset allocation and goals aligned with your time horizon.

What you need to know:

• Market volatility due to geopolitical events tends to be short-lived, and significant intraday swings are common
• The Federal Reserve plans to raise interest rates to battle inflation in 2022, though the current conflict may delay action
• The best days in the S&P 500 tend to occur shortly after the worst days, and staying invested is the only way to catch the rebound
• Unless you have a change in your financial goals, now is not the time to make changes in your investment portfolio

For historical context, review the following chart, courtesy of LPL Financial, which shows how the market performed following major events dating back to World War II:

So far in 2022, investors have seen heightened volatility in global markets due to inflationary concerns and Russia’s pressure on Ukraine. At the onset of the war in Ukraine, the S&P 500 was already in correction territory – down 10% – while tech stocks in the NASDAQ were down even more, and riskier bonds and real estate were also under pressure. As short-term investors sell out of risk assets, such as stocks, they tend to reinvest in the perceived safe havens of bonds and gold, or they rest in cash.

The Federal Reserve carries the responsibility of supporting a healthy U.S. economy. Due to the rapid economic recovery, the Federal Reserve is faced with a growing economy, as evidenced by the highest level of inflation since 1983 at 5.2%, a record 6.4 million jobs added in 2021, and low unemployment of 4%. Federal Reserve Governor Christopher Waller recently said the Federal Reserve should continue to pursue a target range of 1 to 1.25% by July to rein in an “exceedingly hot” economy.

Energy prices for oil and natural gas are spiking, due to the volume of supply from Russia to continental Europe. While Russia does not supply U.S. energy, consumers may still feel tightened global supply and continued strong demand in the form of higher prices at the pump and on heating bills. The longer energy prices remain elevated, the more likely it is that food and other costs will also be impacted. Russia and Ukraine are not major U.S. trading partners, but the two countries are among the top five global exporters of grain, such as wheat, corn and sunflowers, which could affect global food supply. Should the conflict extend, Midwest energy and agriculture producers may experience increased demand.

Near-term volatility and disruption is uncomfortable, but we’ve collectively survived two years of uncertainty with the pandemic, and we will make it through this challenge together as well.

If you have questions or would like to discuss your investments, please contact your designated Bell Bank expert.

 

Becky Walen AFC® CFP®
SVP | Market Development Director

Bell Bank Wealth Management
15 Broadway | Fargo, ND 58102
Office 701.451.3079 | Mobile 701.866.8192 | bwalen@bell.bank

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_{This article has been written for the general information of clients and friends of Bell Bank. It is not intended, nor may it be relied upon, as tax or legal advice with respect to any matter.}