How do geo-political events like the one we are witnessing in Ukraine at the present time affect the Market? Here is a chart that provides a visual of the Markets after the last 5 wars.
You can see from the chart that these types of events have little impact and do not normally last for long periods of time. The market seems to resume the pattern it was on before the geo-political event. In other words, these charts would suggest "buying the invasion" is not a bad idea. Four out of the five charts will show market up ticks after the invasion. I have highlighted the only event that did not follow this pattern, the Afghanistan war in 2001. Before the war, the market was in a downward trend due to the dot com bubble, so after the geo-political event in 2001, the market resumed its downward trend. Knowing this, the question is…… “What was the market doing before the Ukrainian war? Was it bullish (going up) or bearish (going down)?” It was bullish emerging from the pandemic. If history repeats itself, after this crisis, we could expect a post pandemic bullish market to continue. Only time will tell, but history is definitely worth considering. There is money to be made in all kinds of market conditions, we only need to know what the trend is.
As mentioned in previous correspondence, most of our portfolios have been in cash or bonds for well over a month. We have had market exposure with about 50% of our portfolios. That 50% is invested where there is money to be earned; energy, health care, limited exposure to technology, and commodities (things like precious metals, corn, wheat, sugar, soybeans). These types of investments are considered contrarian to inflation.
Inflation appears to be with us for a while. The Federal Reserve is going to be very cautious with how fast they increase interest rates due to soaring oil prices and other commodity increases. Typically, raising interest rates is how the Federal Reserve usually tames inflation. An aggressive rising interest rate policy being pared back is one of the major reasons the stock market has performed as well as it has.
March 3rd, the S&P dipped into correction territory (down 10%). Our actively managed accounts are only down 2-6% depending on risk tolerance. Times like these is when active money management really pays off. When we do receive the all clear signal to go back into the market, some of our portfolio will be leveraged which means we will be earning 1.5 to 2 times what the market is returning. Conceivably, we will not only lose less now but possibly recover any losses twice as fast. We watch your account every day and are doing all we can to put you in the best possible positons to lose less and make more.