Stay the course during uncertain times

Russia’s large-scale invasion of Ukraine is one of the most significant geopolitical events in decades. As we reflect on the news, we are primarily concerned about the countless innocent lives that are being impacted by this war. Our thoughts go out to any of you that have friends, family or loved ones in the region. 

While we can’t predict what happens next or what future headlines will read, we know that this conflict might raise some questions about your portfolio. As in all crises, we apply our evidence-driven approach to planning and investing to help you navigate these uncertain times. It’s important to remember we have worked with you to develop a plan which takes uncertainty like this into account. We’re monitoring several areas including:

• Stock returns: Stock markets have been trending down since the beginning of the year with the U.S. market down roughly 12% and international markets down roughly 6% year to date. Although Russia and Ukraine both have relatively small economies and positions in your portfolio, the primary driver of market performance going forward will be driven by the continued global response to the invasion. 

• Volatility: Markets will be significantly more volatile going forward, which means that we should expect to see mid-to-high single digit swings (both big gains and big drops) in the markets over the next few weeks. 

• Inflation: As the West reacts with trade and monetary restrictions, we could see continued supply constraints of oil and gas as well as agricultural and metal supplies. This would lead to higher commodity prices. Higher prices at the pump and potentially at stores could increase the level of perceived inflation, taxing consumers, and leading to lower demand for goods and services.

For more indepth information on this geopolitical event, watch Dimensional’s webinar recording: The Conflict in Ukraine and Its Impact on Markets.

Dimensional’s Investment Committee recently removed Russia from its list of approved markets for investment. Dimensional’s Investment Committee considers a variety of factors when evaluating a market’s eligibility for investment, which include, among others: government regulation, restrictions on foreign investors in that market, and market liquidity.

On a positive note, the U.S. economy remains strong with low unemployment, significant job openings and positive trends coming out of the pandemic. Although the near-term impact to both the markets and your portfolio is uncertain, we know that markets price in new information quickly and tend to recover even from geopolitical situations such as this. The chart below provides some perspective on how markets have performed after various crises:

All of us at Kraft Asset Management, LLC are here for you. We’ll continue to evaluate how global events may impact your financial plan. Moreover, we’ll continue to proactively seek opportunities to harvest tax losses, rebalance and make adjustments when appropriate.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Total return includes reinvestment of dividends and capital gains.