War

It ain't nothing but a heart-breaker
(War) It's got one friend that's The Undertaker
Oh, war, has shattered many a young man's dreams
Made him disabled, bitter and mean
Life is much too short and precious
To spend fighting wars each day

War - Bruce Springsteen (1985)

 

In the depths of the financial crisis in 2008, every major bank in America was failing (you know, the same institutions that preach to us on how to manage our money). Instead of letting them go belly up, the federal government stepped up and took them over (with our tax dollars of course). During one of those dark days, one of my mentors, Steve Housman, walked into my office and said, ‘remember kid, nobody knows $hit!’ I learned a lot from ‘Hous’ who recently turned 77 and is still managing client portfolios!  Whenever markets are experiencing extreme volatility (falling/crashing), his words from 14 years ago, always pop right back into my head. Everyone wants to know what happens next. How much further will stocks fall? When will we hit bottom? Will stocks recover? How soon? I don’t know, and nor does anyone else. There is a mountain of data at our fingertips. We can learn everything we ever wanted to know about Ukraine and Russia, or how wars impact markets. But really, what we truly want to know is…what happens next??? Unfortunately, this is not knowable. And too many people in my line of work will pretend to know what will transpire. They are taking advantage of your desire for certainty. Don’t buy it! Every talking head on cable news is winging it. They may be experts in geopolitics, but they can’t tell you how the crisis will unfold and ultimately impact your portfolio. Nobody can…

 

Most crises don’t come out of thin air…we were warned:

I find it difficult to comprehend that a sovereign European country is being invaded by Russia in 2022. We need not fear Soviet tanks rolling into our cities, forcing males 18 to 60 to take up arms, sending our wives and children into subway stations. The brutal war images and accompanying headlines will rightfully trigger us. We will assume the worst, that we’re on the brink of WW3. It’s easy to panic and liquidate your portfolio. This is completely normal by the way. Being fearful right now is normal. But history has demonstrated many, many times that we shouldn’t let our emotions (fear) and ugly headlines dictate our financial plan. Think back just 2 years ago when a new little-known virus called Covid-19 began killing us. Investors panicked, markets went into freefall, collapsing nearly 34% in 22 trading days. But markets are resilient, and the S&P 500 finished the year up 18%. I can’t predict how markets will perform this year. I can tell you that over time, markets recover from crisis, including war, and go higher.

Despite the war in Ukraine, the Federal Reserve still has the difficult task of taming inflation in the face of an economic slowdown. I believe this likely dominates markets this year. I expect corporate earnings to remain strong due to low unemployment and consumers who are still spending in the face of high inflation. I don’t suspect the Fed will drive us into recession. The market weakness is likely a buying opportunity for patient long term investors. This is what I believe, these are not predictions.  This war will wreck many lives, forever. The negative impact to your portfolio will likely be temporary.

Time magazine provides several ways to help Ukrainians. Hamilton Wealth donated $1,000 to Voices of Children, an organization that helps children affected by war in Ukraine. 

Please stay safe.

-randy