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CG Advisory Services Update: Russia/ Ukraine

February was another challenging month for investors. Existing concerns of inflation have been exacerbated by the situation unfolding in Ukraine. While the human tragedy of a war can be devastating, the financial impacts don’t have to be. That will be the focus on the comments below, as the humanity of the situation is much bigger than the scope of these few paragraphs.

Markets are hard to predict

The morning of the Russian invasion, US stock markets fell. Most investors would expect that. Before trading stopped at 4:00 ET the S&P 500, Nasdaq & Dow all had positive returns. That sounds surprising, unless you know the history of returns on military conflicts.

Do we invest in Russia?

Our managed strategies do invest in international stock markets as part of a diversification strategy. Russia is a small stock market. Less than 1% of the international stock index. The entire Moscow stock index is about 1/10 of the size of Microsoft (Source: Morningstar Feb 25, 2022). Any exposure to Russian stocks would be miniscule.

How will this affect inflation?

Disruptions in trade and energy could be sources of inflation. Some inflation can be a good thing, as it spurs spending. This is usually caused by demand from buyers of goods and services. The “bad inflation” is when prices go up just because the inputs are increasing. The Russia situation has a potential to be the bad kind of inflation. We are actively monitoring this already.

Should we change our investments?

Probably not. That is, unless you had other changes in your financial situation. Our managed strategies are designed to be durable across most market conditions. Money is allocated to investments with the consideration of when it is needed. Assets needed soon shouldn’t be in stocks anyway. Assets not needed for many years may be able to rebound, even if volatility persists.

Advisory services offered through CG Advisory Services, a Registered Investment Advisor.