It has been difficult to watch recent events unfold in Ukraine. I’ve been holding my family a little closer these past couple of days…I’m sure you have been as well. War in the 21st Century means that we have a 24/7 connection to current events through TV & the Internet…and the scenes out of Eastern Europe have been horrific and heartbreaking.
While it may feel strange to consider the impact of this war on your investments, given the suffering we are collectively observing, it is impossible to ignore the volatility in the stock market. It is also being reported all day long.
Remember: Having a Purposeful Plan in place is the best hedge an investor can have against uncertainty.
First, we believe it is impossible to predict where the market will go. Market participants are collectively pricing in information regarding global events and then acting on that information. Breaking news will likely push the markets up – or down – and it is very hard to predict the news. Therefore, it seems impossible to predict the news’ impact on the market. Staying the course is our first, and foremost, recommendation.
Second, we continue to maintain that Global Diversification is an integral part of a purposeful portfolio. We are careful not to overweight any single country too heavily. In fact, Dimensional’s Emerging Markets portfolio has been underweighting Russian securities since 2014 due to political instability in the country and its impact on foreign investors.
Third, you can take a look at the linked graphic from Vanguard regarding Geopolitical sell-offs historically. It remains to be seen how the market will react to this war but some historical context can be helpful.
Jonathan Hall, CFP®
Warburton Capital Management