Russia’s invasion of Ukraine is sending shockwaves through pretty much every asset class across the globe. Risk assets such as stocks are tumbling. Traditional safe havens like Treasury debt and gold are rising. And oil and other key commodities are spiking at a time when U.S. inflation just hit a four-decade high.
But as disastrous and disorienting as the impact of Europe’s largest military conflict since World War II might be, the best course of action for most retail investors is to keep calm and carry on, market strategists say.
Put more simply: Don’t panic.
For one thing, selling into a falling market (the S&P 500 is officially in correction territory now) is the opposite of what successful investors do. The idea is to buy low, after all.
Equally important is the fact that no one knows what Russia’s invasion of Ukraine ultimately means for everything from energy prices to monetary policy.
And then there’s the case that, historically speaking, stocks tend to recover quickly after being derailed by international turmoil.
Russia-Ukraine’s Impact on the Broader Market
“Geopolitics rattling markets is nothing new,” says Lindsey Bell, chief markets and money strategist for Ally Invest. “It’s typical that the immediate reaction to geopolitical events is the most dramatic. The good news is that the impact tends to be short-lived, only lasting anywhere from one to three months.”
Most importantly, history shows that 12 months after events such as our current crisis, the market edges higher, Bell adds.
Indeed, the market’s record is one of resilience amid times of strife, notes Ryan Detrick, chief market strategist of LPL Financial.
“As devastating as a major conflict could be between Russia and Ukraine, the truth is stocks likely will be able to withstand the geopolitical struggle,” Detrick writes.
Have a look at the table below, courtesy of LPL Financial, which shows past market performance following major geopolitical or historical events since WWII.
“Bottom line is if there isn’t a recession, stocks tend to take most in stride,” Detrick says.
But that doesn’t mean Wall Street won’t suffer some serious short-term disruptions.
Oil Takes the Spotlight
The current crisis has rippled across commodities markets. Global benchmark Brent crude oil futures topped $100 a barrel for the first time since 2014. Consumers can expect higher prices at the pump – and soon – with $4-plus-per-gallon gas becoming the new norm.
It’s important to remember, however, that $100 a barrel is a nominal price. Adjusted for inflation, crude would need to top $120 a barrel to reach 2014 levels. The last time we got there, U.S. shale …….