What Does the Russia-Ukraine Crisis Mean for Investors?

February 24, 2022

There is no shortage of negative news these days.

Top of mind is the escalating tensions between Russia and Ukraine. Closer to home, high inflation persists, and the Fed is preparing to tighten monetary policy.

The immediate fear is that, somehow, the Russia-Ukraine crisis will sink the markets. But for that to happen, either corporate earnings have to drop (which is not likely to any significant degree) or valuations will have to drop (which would be constrained over time). The U.S. economy continues to grow, our country remains open, and, even as the geopolitical worries ramp up, our medical worries are declining. 

Will the Ukraine crisis have an impact? It certainly will, on a geopolitical level. On an economic and market level, though, that impact is and will be much less.

Add this all up, and you see the S&P 500 teetering on correction territory and the Nasdaq nearing bear market territory as some investors ponder the best way to ride out the next few months.

We understand that current events can be a bit overwhelming, and you may feel the need to "do something". But remember, that one's financial planning strategy is based on your goals, time horizon, and risk tolerance, and it's expected that there would be unsettling events along the way, like the ones we currently are facing. 

This is a real crisis, but it is not about economics or markets. As such, the impact of the Russia-Ukraine conflict on your investments will be limited and likely short in duration, as we have seen with other crises.

Do we need to pay attention? Yes, we do, but thoughtfully. Personally, as a human being concerned about other human beings, I am worried and monitoring the situation closely. But as a wealth advisor and investor, I am much less concerned. And that is a distinction to keep in mind going forward.

If history serves as a guide, we know from history that geo-political sell-offs are typically short-lived. Check out this great chart from Vanguard that makes this point.

Keep calm and carry on.