March 2022
Market Update

You know the world is on its last nerve when the Canadians go rogue and the Swiss pick a side. 

Just a few weeks ago, we watched the Canadian blockade in Ottawa that paralyzed key ports of entry into the US as truckers protested rules about mandatory vaccinations.  Well, the world has found something else to obsess about other than the pandemic; that is perhaps the good news.  The not-as-good news of course is the Russian invasion of the Ukraine.  They have moved tanks and troops and dropped bombs into Ukraine, the likes of which have not been seen on the European continent since the last world war.  The implications across the global markets are huge and will continue to evolve as this conflict plays out for all the world to watch.

When presented with an option to escape Ukraine with his family, president Zelensky is rumored to have said that he didn’t need a ride, he needed bullets.  And with that, David took aim at his Goliath.  The world loves an underdog and what started out as typical and expected sanctions from the US, NATO and the EU, quickly took on a life of its own engaging not only countries, but companies, the sports world, even individuals.   No fly zones for any Russian airline.  No soccer or Paralympics for Russian athletes.  Apple, Nike, Ford and a host of companies have restricted product sales to Russia.  No UPS or Fedex deliveries, and restrictions to deliver strictly humanitarian supplies by major shipping lines.  Even Elon Musk stepped up to provide Starlink satellite service to help with communications in the Ukraine.  The world is engaged and Putin may not have anticipated what can happen when one man and social media come together as right now he’s losing the public relations war.   But you also cannot rule out a bully, especially one with nuclear weapons.

The economic impact will be felt here and globally and it won’t be comfortable.  Certainly gas prices have responded with crude jumping to over $110 a barrel, as this represents Russia’s largest export to the world markets.  At home, we import less than 7% of our total oil consumption from Russia and are in the unique position to be able to completely replace that with our own oil resources.  Europe is not so lucky, counting 25% of their oil and 40% of their natural gas supplies from Russia.  Which makes the support of the EU sanctions that much more meaningful, particularly from Germany whose new chancellor, Olaf Scholz, has stated that they will strive to completely remove their reliance on natural gas from Russia.  Second to oil, Russia’s next largest export is wheat; between Russia and the Ukraine, they produce 25% of the world’s supply of wheat (see our graphic of the month - CLICK HERE).  Sanctions can be powerful diplomatic tools, but they come at a cost and currently, this will be higher prices on a variety of products in a world where inflation had already become a problem.

Markets have behaved erratically attempting to anticipate what the fallout may be from these events and we have seen growth stocks falter further, oil rally strongly, and a flight to safety as the US dollar and treasury bonds – even gold, finally! – all rallied.  And then the next day, or the next hour, those trends reversed.

For the month, all major indices were down by varying degrees, led by growth-stocks and technology down 4.96% and the S&P down 3.6%.  This brings losses to these two indices to over 13% for the NASDAQ and almost 10% for the S&P.  Surprisingly, emerging and developed international markets, while down more still held up well given the circumstances, closing down for the month 4.28% and 4.34% respectively. 

We did caution that this is a transition year and to expect volatility.  Last week was a case study in what can happen in markets during periods such as this; Thursday the tech-heavy NASDAQ was down over 3% at the open … and finished up by more than 3% by the close.  We anticipate more such days as events unfold in Europe.

In your portfolios here, we began an exit out of bonds in Total Return in January and have completely gone to cash as the risk of rising interest rates continued to pressure bond prices.  We have seen this before and we prefer to be sitting in cash while the bond market sorts itself out, then to return once prices have stabilized and yields are higher.  On the stock side of the equation, models with a risk-off trigger have raised some cash, and we will continue to monitor the situation both overseas and with the Federal Reserve.  As always, if this volatility prevents you from sleeping well at night, we encourage you to speak with us so we can make sure your plan is aligned with your investments.

At home, we see little progress on the major league baseball strike.  While they have not yet cancelled spring training, it is looking less likely by the day and we will notify you if our games are cancelled just as soon as we know.

Tax day is six weeks away and all 1099’s should now be available; please let us know if you need any assistance or copies of documents and we are happy to help.  Don’t forget our Tax Tips tab on our website for forms and tips.

Talking about such mundane activities – going to a baseball game or filing a tax return – is in stark contrast to what is happening across the ocean today.  It serves as a reminder to us that freedom isn’t free and the Ukrainian people deserve our compassion and support as they fight for their country.

If you have questions, please contact us.

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TAX PLANNING
401(K) ALLOCATION
GRAPHIC OF THE MONTH

To download the March 2022 Newsletter: CLICK HERE