Conflicts, Politics, and Your Portfolio

The current events in Ukraine are nothing to scoff at. On a human level, the situation is poised to bring further tragedy, grief, and unrest. At the same time, political discord will assuredly follow.

And while it’s tough to think of oneself during moments like these, it’s important to note that this too will impact global financial markets.

Only time will reveal what the long lasting effects are. But regardless of what unfolds over of the coming days, weeks, and months, it can be a timely reminder of the disciplines that will serve to benefit long term investors:

Understand that volatility is inherent to financial markets.
All else being equal, your best bet is to usually stay the course.

The media will also chime in, undoubtedly providing a barrage of economic predictions and analysis. The Wall Street Journal’s Gerald F. Seib summed it up well,

“Russia’s military incursion deeper into Ukraine is one of those rare events that won’t merely affect the world. It will change the world.”

In a recent article on the historical effects of geopolitical tension, DFA laid out what may happen during times of political turmoil:

Energy prices can experience changes and fluctuations.
Some markets may close or prove to be illiquid as a result of sanctions.
The Fed may or may not change the pace of projected interest rate increases.

While most these factors lie outside of our control, it’s important to focus on what you CAN control:

Rebalance portfolios accordingly.
Tax gain/loss harvesting.
Evaluate the benefits of Roth conversions.
Focus on your long term objectives.

Lastly, if a picture is worth a thousand words, the kind folks at First Trust provided a nice infographic showing just how resilient markets can be in the face of conflict: