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What Should You Do About the Russia-Ukraine Crisis and Market Volatility?

What Should You Do About the Russia-Ukraine Crisis and Market Volatility?

March 01, 2022
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The events of the last few weeks in Ukraine have been stressful and upsetting to many of us. The buildup of Russian forces along the border, rising tensions, and the ensuing attack have caused worldwide shockwaves. People across the globe are understandably concerned and anxious. 

What’s more, the events have caused economic volatility across the world, with Russia’s currency dropping to historic lows against the dollar and the Russian stock market issuing an emergency closure. (1) On February 24th, the European Stock Market Volatility Index, which measures the expectation of volatility over the next 30 days, neared a 20-year high. (2)

While hopes are high for talks aimed at deescalating the crisis, the financial implications may be considerable. Tough financial sanctions aimed at Russia could lead to an increase in retaliatory cyberattacks. In addition to the conflict in Ukraine, our economy is facing high inflation and continued uncertainty about COVID variants. The DOW was down 400 points on Monday and more than 85% of the companies in the S&P 500 were trading lower. (3)

Financial Markets and Geopolitical Events

Events around the world can quickly shock financial markets, but the reality is that markets often tend to recover rather quickly from external shocks. In fact, since World War II, stock markets typically rebounded within 3 months of a large geopolitical shock. The average time for markets to rebound after major geopolitical shocks is around 47 days. (4) In fact, the U.S. stock market regained losses within 30 days of the September 11th attacks. (5)

Take a look at the following chart to see how stocks typically recover following geopolitical crises: (6)

What to Do During Market Declines

While market declines can be scary, especially for those within retirement, the reality is that these declines often create valuable opportunities. Short-term price drops for companies with excellent long-term value offer a great chance to invest or rebalance. Because markets are prone to quickly recover after geopolitical shocks, it’s critical not to sell during short-term downturns.

Stay Calm

While the current conflict is stressful to many, your long-term investment plan should not be a source of fear. At times like these, it’s important to put current conditions into perspective. This is not the first time the market has taken a tumble and it won’t be the last. Declines in the Dow Jones Industrial Average are actually fairly regular events. In fact, drops of 10% or more happen about once a year on average: (7)

Play Dead

There’s an old saying that the best thing to do when you meet a bear market is the same as if you were to meet a bear in the woods: play dead. While easier said than done, successful long-term investors know that it’s important to stay calm during a market decline.

Market volatility has increased in recent years and it may seem like each episode is worse than the one before. In reality, volatility does not hurt investors, but selling when the market is down will lock in losses.

Remember That Your Portfolio Is Diversified

Fears about war and market declines are stressful. However, it is important to keep in mind that while the stock market is down, your portfolio is made up of both stocks, bonds, and other assets that are designed to work together to decrease overall losses. It’s important to consider your specific portfolio, investment horizon, and circumstances when reflecting on economic events. If you have questions about your portfolio, get in touch with our office.

Review Your 401(k) and Other Accounts

Now is a good time to take a look at all of your investment accounts, including your 401(k) to make sure it is well diversified. If you have not rebalanced your other investment accounts in the last year, get in touch with our office and we’ll take a look and offer recommendations to minimize potential losses.

Speak With Your Advisor

Whether you’re new to investing or an experienced investor, it’s helpful to consult with an objective third party. Human nature causes us all to act out of emotion when our accounts go down. As an independent firm, we put your best interests first. We seek to serve as a support system for our clients, helping them make informed financial decisions that aren’t driven solely by emotion.

I Am Here For You And Your Loved Ones…Virtually

I want to let you know that I am still working and operating my business…just not in the same way as before. If you or your loved ones have any questions or concerns about finances, goals, asset allocation, risk, what the markets are doing, or anything that’s causing financial stress, I am here for you virtually. Contact me at jim@glhcfinancial.com or 916-276-8677 to set up a virtual appointment through Zoom.

About Jim

James Callens is a financial advisor at GLH&C Financial Services, a full-service, comprehensive wealth management firm. Jim has over 40 years of experience in the financial industry and uses his extensive resources, knowledge, and experience to help his clients experience simplicity and clarity in their financial life. Jim spent over 20 years working for GE Financial Advisors, both in their insurance services department and as a regional manager and financial advisor. He took part in GE’s Six Sigma Quality Training program and completed the National Association of Life Underwriter’s four-year LUTCF course. Jim also earned his certificate in financial planning from the University of California at Davis. In 2011, Jim combined his own firm, Callens Financial Group, with GLH Financial Services, creating GLH&C Financial Services, so he could provide even more value to his clients. 

Jim is a member of the Financial Planning Association of Northern California and National Association of International & Financial Advisors (NAIFA). He has served as a board member of several nonprofit organizations and has been involved in Cub Scouts leadership and youth sports coaching. Jim lives in Folsom, CA, with his wife, Melissa, and his four children, Jacob, Kristen, Grant, and Andrew. Together, they enjoy outdoor activities such as kayaking, bicycling, and vacationing at Lake Tahoe. To learn more about Jim, connect with him on LinkedIn.

Investments in securities do not offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested.  No system or financial planning strategy can guarantee future results. 

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(1) https://www.cnn.com/2022/02/28/business/russia-ruble-banks-sanctions/index.html

(2) https://www.cnbc.com/2022/02/23/stock-futures-are-little-changed-after-dow-sinks-to-its-lowest-level-of-the-year-amid-ukraine-crisis.html

(3) https://www.cnbc.com/2022/02/22/stock-market-futures-open-to-close-news.html

(4) https://seekingalpha.com/article/4488660-how-stock-market-reacts-war-based-crash

(5) https://www.forbes.com/sites/jonathanponciano/2022/02/24/russian-invasion-triggers-scary-stock-market-correction-heres-how-long-stocks-take-to-recover-after-geopolitical-shocks/?sh=1e090de224ed

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

(7) https://www.capitalgroup.com/individual/planning/market-fluctuations/past-market-declines.html