Hold on to your coffee cups! As the Ukraine situation develops, the stock market has dipped 7% in the last five days. For the year it is down almost 14%.
Despite Ukraine, half of this drop for the year can be attributed to the Federal Reserve’s threatening to increase interest rates to slow inflation—and the economy. And, as I said in the newsletter, recessions usually come with a 20-30% dip in the stock market.
Unlike what happened in Kuwait when the allied countries came in with a military pushback, it appears that Russia will conquer Ukraine with little military resistance from Ukraine or the world. It seems that the worst could happen is that Russia may face some guerrilla resistance for a time. Sanctions between countries have become almost a yawn, and severe ones have been circumvented “under the table,” as they probably will be this time, too. The result may be a bounce back in market confidence later this year—or sooner.
TD Ameritrade is required by law to report instant and constant valuations on all assets our clients own. As we monitor our accounts, these ups and downs can be alarming. What is our consolation during this period? Knowing that what we own is of a quality substance: Common stocks and funds of good companies that will continue to be successful. And, diversification in our portfolios will also smooth out dips along the way.
Yes, we are on the hunt for investment bargains, too—there are more and more of them.
As one investor today said, “Don’t bet on the end of the world—it only happens once and the odds of it happening aren’t very good.”
John and Seann and Nicholette