Your Personal Plan to Deal with Uncertainty in Global Markets

Published January 27th, 2024 by Steve Stanganelli CFP

You’ve likely been keeping a close eye on the news as the crisis in Ukraine continues and tensions in the Middle East escalate. Above all, our thoughts go out to the Ukrainian military and citizens as well as the civilians in both Israel and Gaza as they navigate their unfathomable respective tragedies . Aside from the terrible human toll, the invasion of Ukraine by Russia and the recent attacks and retaliations between Hamas and Israeli Defense Forces are an important reminder that geopolitical risk is a part of investing in global markets. While external events are beyond our individual control, you are not powerless. As long as you have a plan in place and control your emotions, you can weather the impact of market swings on your nest egg.  Here is what you need to know for your personal plan to deal with uncertainty in global markets.

You may also be wondering what the far-reaching impacts of the situation may be on your personal situation especially as you see an increase in market volatility adversely impacting portfolio values. I thought I’d pass along some insights to help you stay informed and be prepared.

Investing always has risk. Some risks are known. And diversification mitigates them. Geopolitical risks are a risk. And in the near term, there is very little anyone can do to protect from near-term and temporary corrections. Remember: You are investing for the long-term and this recent crisis will pass and appear as a blip on a long-term chart. 

What You Can Do to Protect Your Money - Your Personal Plan to Deal with Uncertainty in Global Markets at ANYTIME:

  • Control what you can: Like the weather, there isn't much you or I can do about a geopolitical event. You can control your emotions though and follow your plan. Timing the market rarely works. An emotional response now only makes things worse in the long run.
  • Hold cash: Sure, it doesn't pay much and loses purchasing power to inflation. But it provides a needed buffer during uncertain times.
  • Diversification works: You need a globally diversified portfolio that includes cash, real estate, US Treasuries, gold, commodities, and alternative investments.
  • Value stocks add protection: Owning well-established, large company stocks of profitable businesses is a time-tested way to protect a portfolio.

These investment elements are already a part of the MarketFlex Portfolios I directly manage for clients. And to a lesser amount, they are already included in investment advice provided to self-directed investors to use with their own portfolios wherever they may be.

Big Takeaway During Market Uncertainty:

The best thing you can do during volatile markets regardless of the spark or underlying cause: Stay Calm. Do Nothing. 

History is on the side of the patient. This link to a Market Perspective may provide historical contextWhile this is from Q1 2022, it offers a concise historical review.

While history rarely repeats, it certainly does rhyme. Whether it was a Greek debt meltdown, US Government shut down, terrorist acts, or military responses, we've been here before with other geopolitical events. The advice I have shared in earlier blog posts on my website is equally relevant now:

This is how I responded when asked on NBC Boston 10 TV earlier on February 23, 2022: Financial Impact of Crisis in Ukraine with Bianca Beltran .

As I said in this interview, if you have a plan, stick to it, stay calm, and rebalance, if needed. As long as you are globally diversified with a portfolio that includes alternative assets (like gold, natural resource and commodities, real estate), dividend-paying stocks, and a cash allocation to cover your expenses for a period that will help you sleep (3 months to 3 years), you will be OK.

Financial Impacts of the Current Russia-Ukraine Crisis:

The most immediate impact investors can expect as a result of these types of crises can be summarized as follows:

  1. Higher prices at the grocery store.  During the early stages of any crisis, the most likely impact is on supply chains and groceries. When Russia invaded Ukraine, we saw this play out over the years since Russia and Ukraine are significant exporters of wheat, rye, barley, and other grains to Central Asia and the Middle East. Although the crisis hasn't widened, any further escalation would drive global food prices higher when many are already struggling to reconcile their grocery budget with checkout line sticker shock.
  2. More pain at the pump. With Russia producing 10.5 million barrels of oil a day and attacks occurring near the Strait of Hormuz along oil transport routes, such disruptions in production would send oil prices soaring even higher. If Russia responds by halting oil exports or tensions in the Middle East lead to fighting along sea routes through the critical Strait of Hormuz, there could be additional pain at the pump as well as higher oil and natural gas prices that would also drive up heating and electricity bills.
  3. More supply chain issues. Russia produces just under half of the world's palladium and smaller amounts of platinum, titanium, and nickel—critical components in smartphones, laptops, and countless other products. Ukraine is Europe's top producer of uranium. Any bottlenecks in production could exacerbate semiconductor shortages and further push up the prices of cars, electronics, and other high ticket items.
  4. Potential cyberattacks. Recalling the disruption caused by the Colonial Pipeline cyberattack in May 2021, additional cyberattacks—especially on the U.S. financial system—are a growing concern for experts as the Russia-Ukraine plays out.
  5. Stock market volatility. We’ve already experienced (and are currently rebounding from) a sell-off, and investors can expect for volatility to continue as the crisis unfolds.

I know you’re already weary from the pandemic or previous inflationary spikes in goods. Unfortunately, global news events even in obscure parts of the world can have a big impact at home. So, they rate as just one more factor to watch. But the first and best thing to do when confronted with any crisis - at home or abroad - is to stay calm and not panic. 

Please know that I will be here to help you and your family weather the economic effects of whatever comes our way. If you have concerns or want to talk about updating your plan or investment strategy, please reach out to me.

NOTE: This post was initially published by Steve Stanganelli, CFP®  on 2/28/2022 after the initial invasion of Ukraine.