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War, Inflation, Oil Prices, What’s Next?

By Dave Verbeke, Financial Advisor

Just when we thought things were getting back to normal, Putin decides to invade Ukraine putting the world and the market in chaos again. Inflation has reached a level we haven’t seen since the 70s. Oil is over $100 a barrel. What is the impact on your portfolio and what is Webb Financial doing to minimize the impact on your investments?

There are a few things to remember when investing in the stock market:

Large draw downs in the market happen frequently, especially when unplanned events happen. It’s impossible to accurately time the market. A decline in the market is the right time to rebalance and make sure the investments in the portfolio still meet your goals. In taxable portfolios, it’s a great time to balance gains & losses for tax purposes.

Make sure your portfolio matches your appetite for risk. Everyone loves to see their investments go up but hate to lose money. If your account had a larger short term loss than you’re comfortable with, you may be invested too aggressively. We’ve implemented a new tool called Riskalyze that helps you understand, in dollars, the ups and downs of your risk profile. You might need to trade some upside to minimize the down. If you’d like to review your risk score, contact your advisor.

Use the right investments to meet your goals. We are constantly reviewing our fund choices and making sure that they meet the expectations for that type of investment. In many portfolios, we have added risk reducing products such as structured notes and buffered ETFs. These allow us to have downside protection from the market and allow for monthly income to reinvest. We will continue to add these to accounts, where it makes sense, to help protect the downside risk.

The war in Ukraine is likely a short term impact to the overall market. The sanctions on Russia, and the isolation of that nation, are here for the longer term. The sanctions will affect oil, grain, fertilizer and metal prices. Some unintended consequences could benefit US producers of those products and increase earnings of US based companies.

Expect volatility every year. We can’t avoid the downs in the portfolios without also missing the ups that are needed to grow your account over the long term. The chart below was provided by Vanguard and shows the impact of geopolitical events on the market. Let’s hope for a peaceful resolution in Ukraine, and a successful reduction in inflation, so things can get back to “normal”.

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