Uncertainty in Ukraine
Given all the media attention to the situation in Ukraine, we thought we should address that concern for our clients.
The markets seem to be anticipating, at least to some degree, an invasion of Ukraine by Russia. While we don’t make predictions about the unknowable future, it seems there is a high probability that this may occur.
If there is an invasion, the market would most likely react in a negative fashion. One big unknown is how much of a negative reaction is currently reflected in the market’s value, since this has been talked about for several weeks now. We believe that some of the negative consequences of this event are already baked into the markets’ current valuations.
Might there be more downside for the market in case this does occur? We don’t know, but we shouldn’t be surprised if there is.
For long term investors, financial, political, geopolitical, and other discouraging events have and will occur regularly. Whether it was Iraq invading Kuwait which led to the U.S. Operation Desert Storm, 9/11 and the ensuing U.S. military engagement in Afghanistan, the Fiscal Cliff, the European debt crisis, impeachments of the President, the Covid pandemic, you name it. Unsettling events are part of any long-term investor’s experience.
Below is a chart showing various events over the past 50 years and a chart of the global market during that time.
Source: Dimensional Fund Advisors (DFA)
Then what is a reasonable approach to uncertainty, which is always with us?
Being diversified and not reacting to our emotions are two keys to being a successful investor. And it is not easy when 24-hour news networks are constantly broadcasting news that inclines investors to “do something”.
John Bogle, who started the investment firm Vanguard and had a clear understanding of the benefits of long-term investing, often turned around a common saying of “Don’t just stand there, do something!” Bogle turned that around when discussing investing with a saying of “Don’t just do something, stand there!” Warren Buffet had a quote like that, saying he made a lot more money doing nothing than doing something.
Given all the moving parts in the world right now, we believe we are probably in a period of heightened volatility which can test investors’ resolve. But will the CEOs of companies that you own (primarily through mutual funds) such as Pepsi, Wal-Mart, Microsoft etc. quit seeking new markets, new products, more efficient companies? No. Will the shares of their companies bounce around reflecting investors’ current emotions? Yes. As they always have.
The good news is you don’t have to react to the markets’ daily fluctuations.
As always, we stay in touch with you on a regular basis, but please don’t hesitate to talk with us with any thoughts, concerns, or questions you may have.
Thank you again for your trust and confidence in us.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any opinions are those of the authors and not necessarily those of Raymond James. This material does not constitute a recommendation of any kind. Past performance may not be indicative of future results. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected.