Now to the rantings…..
The continuation and military rapid escalation to the Ukraine “conflict” continues. Not a surprise and no quick happy ending. From the Soviet standpoint, it’s taking longer than hoped and carries the seeds of a bad outcome. For our younger readers….The Soviet military conflict/occupation in Afghanistan (79-89) was a huge contributor (at least economically) to the demise of the Soviet Union in the early 90’s. That, and collapsing oil prices, pretty much ended Russian relevance on the world stage until a few years ago. Good chance history repeats itself.
Looking forward, as this thing goes on, the media coverage will get uglier. From a humanitarian standpoint, this thing is awful. One good byproduct of today’s social media culture is that the outrage by consumers will push hard on governments and companies to sever ties. Harsh reality is still the current global dependence on fossil fuels and Russia’s position as a supplier of those fuels. At this point, Europe cannot function without Russian oil, so the activities taken are more long-term. Ukraine may fall militarily but occupation will be very costly to the Russians. The economic graveyard created by coordinated sanctions will be brutal on the Soviet people. Will also spill over to the rest of the world, at least in the short term. Recession is very much a possibility.
Economics is dynamic and changes with new inputs. A month ago, the markets were adjusting with the fear of rapid Fed tightening. A fear that’s pretty well not a thing anymore. The “tax” put on consumers from higher oil prices will do the job higher interest rates were needed to do. That could be a positive as we slog forward. Still believe rates go up but potentially the rate of ascent will be less. Regardless, the markets have quickly adjusted to these realities, and we have corrected. Most stocks are in bear market territory (20 percent decline) and the indices mask the real level of damage. The level of decline commensurate with the risk level of one’s portfolio. From an advisor’s standpoint, happy we were neutral in our allocation going in. A sentiment echoed by most of our clients.
A few months ago, we could not find bargains or places to put new money to work. As the correction continues, and various sectors roll over, opportunity is starting to show up. A good measure of bad news is priced into the markets. Not moving north of a neutral view just yet, but it is starting to get interesting.
Thanks for listening and thanks for the relationship. As always, don’t hesitate to reach out at any time.