For this edition we take a break from our normal format to focus on the events in Ukraine and their impact on the stock market and your investments.
Like many of you, we were disheartened and saddened to witness Russia’s invasion of Ukraine last Thursday. Throughout the previous weeks of troop buildup we remained hopeful that a peaceful resolution was still possible. Our hopes now turn to a quick cessation of hostilities and minimal loss of life.
On the investment front, remember that above all else the market hates uncertainty. The second half of February continued to experience great volatility, much of it generated by anxiety over a possible war in Ukraine. Between February 15 – 23 (the buildup to the invasion), the Dow Jones Industrial Average (Dow) lost 1,857 points, the S&P 500 246 points and the NASDAQ Composite Index (NASDAQ) 1,102 points.
However, when the invasion commenced on February 24th, all the major indexes jumped higher. On February 24 – 25, the final two trading days of last week, the Dow gained 927 points, the S&P 500 159 and the NASDAQ 657, erasing half of the month’s losses in two trading days! It’s as if the markets breathed a sigh of relief once Russia’s true intentions were revealed.
That is not to suggest we won’t continue to see volatility fueled by this conflict, but perhaps the extreme anxiety is beginning to fade.
Looking forward, concerns center on the economic impact of this conflict. As sanctions continue to roll out and Russia becomes more and more isolated, its economy will certainly be impacted. However, Russia’s vast amount of natural resources makes it an important trade partner, particularly for Europe. Two examples:
Europe gets 40% of its natural gas and 25% of its oil from Russia1. With winter weather continuing, prices for heating homes and gas will likely rise. This increase in expenses will likely impact the region’s economy.
Russia and Ukraine are huge producers of wheat – combined they account for nearly 25% of the world’s supply2. A disruption of that magnitude will certainly impact the world’s food supply.
In general, the United States is much less reliant on Russian resources and therefore will likely not be as impacted as some of their larger trading partners.
Wrapping up returns for the second half of the month, as of February 28th, the markets all posted losses. The Dow fell a total of 1,096 points (3.13%), the S&P 500 dropped by 97 points (2.17%) and the NASDAQ lost 388 points (2.75%).
We recognize that much remains unknown about this conflict and its impact on your investments. Please rest assured that we are monitoring the situation and will remain in contact with you. Of course if you have specific questions please do not hesitate to reach out.
1 & 2 “What’s at Stake for the Global Economy as Conflict Looms in Ukraine”, New York Times, February 21, 2022