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Staying the course during the unfolding conflict in Ukraine

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News of Russia’s invasion of Ukraine continues to dominate the headlines, leading to increased market volatility over the past few weeks. Both equities and fixed income have experienced larger intraday moves than they did at almost any point in 2021. Oil is over $100 a barrel for the first time in years, which may contribute to higher inflation, yet the Fed’s plans for raising rates has become more uncertain due to the unfolding conflict in Eastern Europe.

It is tempting to want to reduce the risk within an investment portfolio during these periods of uncertainty. When the possible outcomes are wide ranging and impactful – both to markets and people’s lives – it is easy to let fear drive decision making.

But even if an investor could accurately predict the outcome of the Russia/Ukraine crisis, or any geopolitical event, it doesn’t always mean the investor can profit from it as markets can act in unusual ways. It is not uncommon for markets to rise on seemingly bad news, either because the information was already priced in, or the news was not as bad as feared, or because the market appeared oversold to contrarian buyers, or some other event starts to dominate the headlines. As a result investors should avoid overconfidence in predicting the outcome of a geopolitical, economic or financial event, and should refrain from making too many changes to their investment portfolios during periods of stress.

It is good to remember that economic growth continues to be strong in the US, with low unemployment, good wage growth, rising consumer spending and strong corporate earnings. Mortgage rates have risen, but they are still well below longer term averages. The exposure of most investment portfolios to Russia directly is very small, and the investment team is monitoring the exposure to Russia in all client portfolios. The most prudent course of action for almost all investors is to stick to a long-term investment plan, ignore the noise of day- to- day market movements and reach out to your wealth advisor with any questions.

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About Josh Howard

Josh Howard is the Chief Investment Officer at Bremer Bank. He leads Bremer’s investment team, overseeing the development, management, delivery and communication of investment strategies and model portfolios that meet the needs of Bremer Wealth clients. Josh has more than 20 years of financial services experience, and spent seven years at the Royal Bank of Canada in a variety of investment leadership roles. Most recently, he served as Director of Global Risk Management for RBC Global Asset Management, where he managed all areas of investment risk oversight, covering equities, fixed income and alternatives as well as was responsible for deriva...

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