As you are undoubtably aware, the Russian invasion of Ukraine has continued to intensify with no end in sight. Russia’s apparent goal has gone from occupying a couple of relatively small eastern provinces to one of total occupation.
The human tragedy continues worsening as it has been reported that over 2.4 million Ukraine citizens have fled the country with deteriorating conditions continuing to increase as the Russians march toward the capital of Kyiv. This is a tragic development that leaves us all saddened. While financial matters are probably the furthest thing from many people’s thoughts today, it is important to address the market situation for those worried about the implications. Nobody knows how this crisis will play out but following are some things to keep in mind:
- First, making emotional decisions during times of crisis is generally unwise. If the advent of COVID in early 2020 taught us anything, it is that a crisis is exactly the time not to make large portfolios changes. What seems obvious at the time all too often turns out to be exactly the wrong strategy in retrospect.
- Secondly, markets tend to react to military events in similar ways. At first there is an immediate emotional and volatile reaction followed by a drawn-out process of weighing the true economic and market fundamentals. Rarely have military conflicts resulted in either global recession/depression or deep prolonged bear markets.
The following table illustrates what has happened in the S&P 500 index after a crisis:
| Event | Start Date | 1-Month Gain/Loss% | 3-Month Gain/Loss% | 6-Month Gain/Loss% | 1-Year Gain/Loss% |
| Germany Invades France | May-40 | -13.5 | -25.8 | -6.0 | -22.0 |
| Pearl Harbor | Dec-41 | -2.7 | 0.3 | -5.6 | 3.7 |
| Korean War | Jun-50 | -7.6 | -8.7 | 4.9 | 11.2 |
| USSR in Afghanistan | Dec-79 | 0.3 | 5.4 | 6.4 | 25.7 |
| Falkland Islands | Apr-82 | 2.1 | 2.7 | 5.8 | 34.5 |
| Iraq Invades Kuwait | Aug-90 | -3.3 | -8.1 | -2.1 | 10.2 |
| Gulf War | Jan-91 | 4.4 | 16.7 | 20.6 | 32.3 |
| Iraq War | Mar-03 | -0.5 | 2.1 | 17.4 | 28.4 |
| Russia Invades Crimea | Feb-14 | 0.8 | 1.0 | 8.3 | 14.7 |
| Average | -1.7 | -0.6 | 6.7 | 17.1 | |
| % Positive | 45% | 78% | 64% | 91% | |
| Source: Bloomberg, S&P 500 Total Return, From Beginning of Each Conflict |
As the table shows, in most cases the market rebounded to a positive return over a 3 to 12 month period. There is no guarantee that the current crisis will work out in the same way in the stock market, but it is important to note that patience is a virtue in these situations.
The crisis will most likely create continued volatility in the stock and bond markets in the coming weeks and months and encourage you to talk to a financial advisor who can help you navigate through this crisis and devise a plan for a positive outcome.
Mario Hernandez has been a Certified Financial Planner (CFP) for over 30 years and brings a vast amount of experience in the financial planning and investment management business. Through Longevity Wealth Management, Mario provides holistic planning services that help clients find solutions to live their best life. Mario’s email address is mario@longevitywealthmanagement.com. Securities offered through Osaic Wealth, Inc. member FINRA/SIPC. Investment advisory services offered through Longevity Wealth Management. Osaic Wealth, Inc. is separately owned and other entities and/or marketing names, products or services referenced here are independent of Oasic. Certain insurance products are offered by Mario Hernandez as a licensed agent independent of Osaic Wealth, Inc.. Mario Hernandez is not affiliated with Osaic Wealth, Inc. or registered as a broker-dealer or investment advisor.
