Take a look at last week’s market recap from Joe Gallemore, CIMA® Partner & Director of Investment Management for Argent Bridge Advisors. Watch the video now!
Joe’s Notes:
War in Ukraine has increased volatility this year.
- The day after Russia invaded, the major market indexes had one of the largest one-day swings since the Covid-crash of March 2020 but ended that day and the next positive. It’s been up and down since then as investors struggle to digest what developments in the war will mean for stocks and the economy.
- International and Emerging Market indexes have understandably been affected the most. The sanctions on Russia are having ripple effects on economies that either are dependent on Russian energy or are sensitive to the cost of oil/gas.
After being mostly pushed down by inflationary pressures and looming interest rate hikes, the US aggregate bond index had a meaningful recovery last week. It posted a +0.95% return which is a big 5-day move for this asset class. This was primarily caused by a flight-to-safety from investors exiting stock holdings for the safety of US bonds.
As the war continues, so will volatility. Worsening conflict will further weigh on the market because, so far, the primary weapon used by the Western powers has been economic devastation. And naturally, that directly affects stock markets. In contrast, positive news out of the conflict, primarily developments towards peace, will likely lead to market upswings because investors will be quick to extrapolate the effects of an implied peace deal.
We are not making any major strategy shifts in portfolios. In our last newsletter, we shared a chart that showed how the stock market has persisted in growing through and after major world conflicts. I checked all the funds we employ and the exposure to Russia is minimal.
- On the flip side, the portfolios we design for you hold real asset funds, which have benefited from the rise in commodity and energy prices; and several of the strategies we use have the ability to hold cash, which is an obvious advantage when the market is correcting and seeks deploy that cash when conditions improve.
