Thoughts on the Events in Ukraine and Your Portfolio

The crisis in Ukraine has most of us wondering what’s next.  While we pride ourselves on keeping abreast of global events and market movements, we do not have a crystal ball to tell us how this will play out.

This latest political and market uncertainty is not trivial, but it is likely to be resolved with minor long-term market impact.  See the chart below, created by J.P. Morgan Asset Management, listing prior geopolitical events and subsequent market moves. 

Aside from the human suffering and tragic loss of life, we can envision higher energy and materials prices as well as higher food prices - specifically in Europe - as likely collateral damage of Russia’s assault.  These changes will likely lead to reduced long-term dependence on Russian energy. This may be accomplished though higher oil and gas production, re-consideration of nuclear power and increased investments in alternatives.  The market will react to address the negative economic events of the moment. 

On this point, it is important to remember that maintaining your exposure to risky (growth-oriented) assets during volatile times is key to achieving your long-term objectives.  The largest gains tend to take place in short bursts, and missing those moves can be catastrophic to long-term investment success.  This is not to downplay the severity of the situation, nor to say that real geopolitical risks don’t exist.  It is to say that maintaining a cool head and keeping an eye toward the distant horizon is a foundation of disciplined investing. 

In some cases, we are putting new cash to work for clients.  If you have had a liquidity event recently and are holding cash, please let us know and we can discuss your options. 

This type of event is a good time to use your Stembrook Strategic Investment Plan as a touchstone.  In your plan, we have considered your long-term goals and growth requirements, your need for shorter-term liquidity and your willingness and ability to weather market volatility. We proactively work to make sure your plan remains in line with your evolving goals and circumstances, but if you think we should review it, please reach out to us.

Generally speaking, our portfolios have protected on the downside this year, both in stocks and bonds; we remain quite comfortable with our positioning.  That said, if you would like to discuss your portfolio, we are always here to talk. 

We expect continued volatility as this situation evolves and will continue to look for ways to mitigate risk and take advantage of opportunities in your portfolio. 

As always, we thank you for your confidence in us and truly value your partnership.  

Sincerely,

Peter & Tom