This is such an ugly topic yet looking at the data, sadly, war is common. There are several definitions of war based largely on the number of deaths in a given time period, but a conservative estimate tells us that there are currently more than 40 conflicts going on around the world*. They are primarily in Africa, Asia, Southeast Asia, the Middle East, and South America.
The purpose of this blog is to educate Apella clients on how markets work and not to opine on the politics of specific conflicts, but the Russian invasion of Ukraine has some investors understandably concerned. First and foremost, history tells us that wars have little long-term effect on stock markets. Short term volatility increases for sure but over time, the companies that make up a given market will do what they’ve always done, attempt to grow and increase profits. Of course, war time economies can create some winners and some losers and so speculators must be cautious, but we are broadly diversified investors and we will own both the winners and the losers during this latest conflict. Again, we can’t emphasize enough the importance of diversification.
Some nervous investors may be inclined to sell and go to cash. Interestingly enough, currencies don’t perform well during war time. Paper assets typically lose value while income producing assets like stocks tend to bounce back more quickly. Some commodities do quite well as we’ve seen recently with crude oil. You’ve no doubt seen the effect of this locally at the gas pump. Many food items have increased in price as well.
Our advisors will encourage most investors to stay the course during this difficult time in Asian markets. In the meantime, we hope and pray that a quick solution will bring the violence to an end and our thoughts are with the Ukrainian people.
Apella Capital, LLC is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration with the SEC or any state securities authority does not imply any level of skill or training. No one should assume that future performance of any specific investment, investment strategy, product, or non-investment related content made reference to directly or indirectly in this material will be profitable. You should not assume any discussion or information contained in this email serves as the receipt of, or as a substitute for, personalized investment advice. As with any investment strategy, there is the possibility of profitability as well as loss. Apella Capital, LLC does not provide tax or legal advice and nothing either stated or implied here should be inferred as providing such advice. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Diversification seeks to reduce volatility by spreading your investment dollars into various asset classes to add balance to your portfolio. Using this methodology, however, does not guarantee a profit or protection from loss in a declining market.