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Sound Advice: March 2, 2022

The Outlook: Short-Term Rattle, Long-Term Rebound

(excerpted from the New York Times) 

Global markets usually weaken as wars approach, strengthen before wars end, and treat human calamity with breathtaking indifference.

That’s been a common historical pattern, anyway.  And, with some important caveats, it seems to be playing out with Russia’s invasion of Ukraine.

President Vladimir V. Putin of Russia has already rattled stock, bond, and commodity markets.  U.S. stocks have gyrated wildly since the start of the war, with the S&P 500 falling at one point into what Wall Street calls a correction – a decline of at least 10% from the most recent high – before regaining ground.

The escalating conflict has shifted the value of mutual funds and exchange-traded funds in millions of retirement accounts, even for people who have not thought deeply about Eastern Europe and who have never invested directly in oil, gas or other commodities.

Mr. Putin’s invasion of Ukraine and assault on its capital, Kyiv, brought global condemnation and raised the risk of protracted war.

Where the conflict may be heading now isn’t clear, nor are the market implications.  “Energy prices will keep rising, and equities will keep falling,” Claus Vistesen, chief eurozone economist for the research firm of Pantheon Microeconomics, wrote shortly before the invasion started.  Since then, market behavior has been erratic.

. . .  the overall market has been afflicted by multiple troubles: fears of rising interest rates, sizzling inflation, and continuing supply-chain bottlenecks. Russian threats to Ukraine are likely to whipsaw the market further.

Riding out a storm in the stock market has been a good strategy over the long term.  One year after the 1941 bombing of Pearl Harbor, the S&P 500 gained 15 percent.  A year after the U.S. invasion of Iraq in 2003, it was up 25 percent.  History shows that just one year after most stock market-shattering crises, the S&P 500 has risen.

That’s likely to be the case in the future, too.  But it’s impossible to be certain of it.

N. Russell Wayne, CFP®

Sound Asset Management Inc.

Weston, CT  06883

203-222-9370

www.soundasset.com

www.soundasset.blogspot.com

Any questions?  Please contact me at nrwayne@soundasset.com

 

 

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