The news on Thursday morning of a full-scale Russian invasion into Ukraine pushed stock markets lower around the globe. All of the major US indexes were down sharply in the first hours of trading. The US markets have struggled all year from worries over inflation and the expectation of higher interest rates in March. The unknown economic impact of the invasion only heightened concerns on the part of investors.
On Thursday afternoon after the President spoke to the American people about sanctions, the market reversed quickly in an unexpected turn. It recovered all the day’s losses and closed higher for the day. Analysts trying to determine “why” indicated a couple of possible reasons for the reversal. The sanctions so far are not as strong as expected leading some to think the economic fallout will not be as severe. Also, the invasion may cause the Federal Reserve to soften the interest rate increase expected in March until the full extent of this crisis is known.
Market Tests January Low
Whatever the reason, we like to focus on “what” happened and not “why” it happened. The S&P 500 broke through the January low yesterday followed by a swift reversal. The market is now testing the January low which we wrote about on February 4th. It is still too early to know whether the bottom is in, or prices will fall further.
At times like this a plan is very important. A plan prevents an investor from the emotional decisions driven by events like we saw yesterday. The best practice is to have a plan and then follow it.
Over the past few weeks weaker positions in our accounts have hit protective stops. As a result, our accounts are holding more cash than usual and the stocks in accounts are titled towards the sectors showing the most relative strength. We are watching for opportunities that are likely to follow.
Give us a call if you would like to discuss an investment plan and would like a second opinion.
Written by Connie C. Guelich, CFP, AEP, CLU, ChFC. This represents our views at the time of this writing, and it is subject to change. It is not intended to be personal investment advice. If you would like to discuss your own account, please don’t hesitate to call us.