Presented by Trevor Kurth, CFP®
There is plenty to worry about these days.
It’s been quite a week, with many of us waking up to learn about the terrible events in Ukraine. You’ve likely heard about the possible second-order effects, like a skittish stock market, potential energy supply constriction, and the threat of continuing supply chain disruptions.
Closer to home, high inflation persists, and the Fed is preparing to tighten monetary policy. And while Covid is moving away from the front page, the markets have a lingering worry that another variant could emerge. Before long, the midterm elections will begin making headlines as well, as candidates take positions.
Add it all up, and you see the S&P 500 teetering on correction territory as some investors ponder the best way to ride out the next few months.
If you’re worried about the financial markets, please reach out. I understand that current events can be a bit overwhelming, and you may feel the need to be proactive. But remember, we created your financial strategy based on your goals, time horizon, and risk tolerance, and we anticipated there would be unsettling events along the way.
In the Image below, you are able to see past geopolitical events and the how the S&P 500 reacts and responds.
Upcoming Fed Decision
The Russian invasion of Ukraine has made the Fed’s interest rate decision a little more complicated.
The Fed appears set to raise interest rates by 0.25% at its March meeting. Up until recently, there was talk by Fed officials that the economy needed a 0.5% bump to help manage inflation.
Energy prices have been rising since Russia began to assemble forces at the Ukraine border. As prices rise, consumer discretionary spending trends lower as businesses take on higher costs. (Remember, consumer spending accounts for a big chunk of our overall economy.)
Higher energy prices, higher commodity prices, and the prospect of slower economic growth due to lower spending place the Fed in a bit of a pickle; the inflationary impact of these factors could be considerable.
Fed Chair Jerome Powell testified before Congress that he still sees interest rate hikes ahead but acknowledges that geopolitical events have interjected uncertainty into the Fed’s outlook.
No one knows how long the current crisis will last or how it may further rattle an already volatile market. While we are not foreign policy experts, we wanted to reach out to let you know we are keeping a close eye on the latest news as it unfolds, with a specific focus on the ways it may impact our clients.
Please don’t hesitate to reach out with any questions or concerns you might have. In the meantime, our thoughts and prayers are with the people of Ukraine and anyone impacted by the crisis.