March 2022
Thus far 2022 has been challenging for stocks, with the S&P 500 down about 8% for the year through February. Pressures from inflation and potential tightening by the Fed in the coming months, as well as the ever-worsening Russia/Ukraine crisis, and fears about rising energy prices, acted in concert to weigh on the market.
Geopolitical uncertainty came to an end on February 24, when Russian President Putin launched a “special military action,” otherwise known as an invasion, violating Ukraine’s sovereignty, and triggering the worst crisis in Europe since World War II. While markets tumbled immediately following the invasion, the major indices recovered soon afterwards, most likely because the uncertainty around Putin’s actions had been removed. President Biden, along with European allies, acted quickly to impost harsh sanctions on Russia. Unless Russia ends the conflict quickly, more sanctions will certainly be coming. While Russia’s principal trading partners are Europe and China, the country is one of the world’s top oil producers. Sanctions will have a ripple effect around the world, with oil prices surging and US consumers experiencing higher energy prices and another bump up in inflation. However, keep in mind that Russia is less than 2% of the global economy.
Ongoing upheaval and uncertainty, as well as higher prices and rising interest rates, will continue to put pressure on the market. And we can expect volatility for at least the next few weeks. Still investors are well advised to sit tight. We’ve seen serious geopolitical and economic crises before. We will see them in the future. But in time, what seemed serious and even terrifying in the moment, becomes just another blip in the long march of history. Given our belief in the potential for the market to reward investors over time, we believe the best course of action is to maintain discipline and stick to your investment strategy.
Stay the Course
It's difficult to maintain a positive outlook when the media inundates us with stories of economic and geopolitical doom and gloom every day. Events like Russia’s war with Ukraine are concerning and have an impact on markets. However, when you take a look back, you can see that the market has recovered from all kinds of challenges.
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S&P 500 Index represents the 500 leading U.S. companies, approximately 80% of the total U.S. market capitalization.
