Some perspective on the grim situation in Ukraine and what could happen in markets.

(Need a break from it?  Scroll down to the P.S.)

The invasion of Ukraine is a serious and scary escalation in tensions between Russia, Europe, and the United States.

Before we dive into what it could mean, let's take a moment to think about the many folks who are suffering and dying as well as the ordinary Russians who will suffer from sanctions, instability, and economic damage.

We hope and pray that diplomacy can end this crisis for all our sakes.

Let's talk about some possible implications for markets and our economy.

Given Ukraine's critical pipelines and Western sanctions on Russia, the crisis may lead to higher energy prices, which will trickle down to higher pump and heating fuel costs.¹

Sustained price increases could hamper the Federal Reserve's effort to control inflation, so we're keeping an eye on that as well.

What could happen in markets?

Extreme volatility, as we've already experienced, is very likely.  Another correction (or even a bear market) is definitely possible.

What does history teach us about market reactions to geopolitical shocks?

History shows that stocks usually recover quickly from geopolitical crises.

We’ll add a disclaimer that the future doesn't perfectly match the past — but it often rhymes.

Let's take a look at some examples from other invasions and wars^.2

 

 

Here's the key takeaway: short-term, markets usually react badly.  However, a year later, markets have historically recovered.

Will they always?  In every case?  That's impossible to say. 

But, the study of 29 geopolitical events since WWII shows a general trend toward short-term losses in the first weeks and longer-term gains over months.²

A note: "geopolitical event" is a very antiseptic phrase for horrible things like bombings, wars, invasions, attacks, and really fails to encompass the full cost in human misery.

Let's never forget the truth behind the numbers.

We can't know or control what happens next.  We can hope, pray, donate, and speak out.

And we can focus on what's in our control: Ourselves, our actions and reactions, and our strategies for uncertain times.

Let's hug the people we love extra tightly today and be very grateful for our blessings.

 

Sincerely,

Your Eagle Wealth Team

 

P.S. Tired of war and bad news? Need a break? We've got two TED talks for you: 1) A dive into research that shows how our brains might be wired for optimism; 2) How to forge meaning from challenging moments.

P.P.S. Looking for ways to donate to Ukrainians? Here's a roundup of some organizations doing good work.

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Brody has kept busy this winter by finding new ways to give back to the community.  He recently began volunteering with Habitat for Humanity as a financial mentor to families in the homeownership program. 

During their meetings he teaches budgeting techniques, how students can maximize their income, and tools to strengthen financial confidence.  While the program is a requirement for the families to own a home, Brody focuses on nurturing a relationship and building trust.   Brody thinks having honest conversations about money is the first step in helping students to walk away with actionable goals.

Hats off to Brody for inspiring the rest of the team to get involved.  How about you?  What local programs do you like to support in your community?

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The Week on Wall Street War in Ukraine weighed on stocks as investors assessed the economic impact of continued hostilities, expanding economic sanctions, and potentially higher inflation due to rising oil prices and new stresses on the global supply chain. The Dow Jones Industrial Average fell 1.30%, while the Standard & Poor’s 500 lost 1.27%. The Nasdaq Composite index slid 2.78% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 3.21%.1,2,3   Another Volatile Week The uncertainty introduced from Russia’s invasion continued to whipsaw the financial markets last week. Intensifying hostilities early in the week sent stocks sharply lower as oil prices surged and a flight to safety drove investors to buy bonds. Stocks rebounded mid-week following the release of positive economic data and Congressional testimony by Fed Chair Jerome Powell, who said the Fed is likely to move forward on rate hikes, but would proceed cautiously. Investor enthusiasm was short-lived, however, as stocks resumed their decline on Thursday into Friday despite a strong employment report.   Powell Testifies Fed Chair Powell told Congress on Wednesday that he would propose a 25 basis point increase in the federal funds rate when the Federal Open Market Committee meets in mid-March. He conceded that the invasion of Ukraine and the economic sanctions against Russia introduced a level of uncertainty and that the Fed would proceed carefully with monetary tightening. Powell also testified that he would not have the Fed’s strategy to shrink its balance sheet finalized before the mid-March meeting. Alluding to the urgency of fighting inflation, Powell left the door open to more aggressive rate hikes later in the year.4

THE WEEK AHEAD Key Economic Data Wednesday: JOLTS (Job Openings and Labor Turnover Survey). Thursday: Consumer Price Index. Jobless Claims. Friday: Consumer Sentiment. Source: Econoday, March 4, 2022 The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision. Companies Reporting Earnings Tuesday: Guidewire Software, Inc. (GWRE). Wednesday:    Asana, Inc. (ASAN). Thursday:  JD.com, Inc. (JD), Ulta Beauty, Inc. (ULTA), DocuSign (DOCU), Rivian Automotive, Inc. (RIVN). Source: Zacks, March 4, 2022 Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

1 - https://www.nytimes.com/2022/02/27/business/oil-prices-russia-ukraine.html

2 - https://www.reuters.com/markets/asia/live-markets-what-history-says-about-geopolitics-market-2022-02-18/