The Ukraine War and Your Finances

Ukraine War Brings Financial Turmoil

BY STEVE DINNEN

We can all agree the Russian invasion of Ukraine is a cruel, pointless humanitarian disaster. It’s difficult to comprehend the inhumanity that is unfolding. But from the perspective of an American investor, it’s not so difficult to see the impact of war by way of the current rattling of the markets. War is not good—for people or for markets, especially when a world power like Russia is involved.

Economically, Russia accounts for just 3% of the world’s GDP (11th-largest, overall). But as Kent Kramer (pictured above), chief investment officer at Foster Group, pointed out, it plays an outsized role in several key areas. Russia supplies 11% of the world’s oil (the U.S. is first, with 20%), and accounts for 17% of its natural gas. Russia also exports a lot of precious metals, industrial metals and wheat. As the country busied itself with, and then launched, its invasion, it basically took itself out of the world market for everything it made.

Other oil producers—OPEC nations, for instance—can turn on the taps to boost supplies. Steelmakers and metals producers outside of Russia can ramp up, as well. But that will take time for the global market to step in and fill any void created by Russia’s absence.

Added to this mix is U.S inflation. In February it registered a 7.9% gain over a year earlier, the steepest climb in decades. Megan Rosenstiel (pictured right), a partner at West Des Moines wealth management firm Gilbert & Cook, noted that the inflationary impact of higher energy and other prices, along with the prospect of decelerating economic growth, also has complicated the Fed’s strategy to guide interest rates higher. Already, she said, the probability of a 50 basis point (0.5%) interest rate hike at the Fed’s March 2022 meeting seems less likely than it was just a week ago.

Inflation could have some staying power. But Kramer suggested the effect of the Ukraine war will resolve itself. “Geopolitical selloffs are typically short,” he said, though they are traumatic.

This would include the Cuban missile crisis, the Brexit vote in 2016 and the Iraq War. On average, markets had returned to normal and actually posted gains of 9% within a year of each of these underlying events.

When dealing with short-term volatility, you should "keep an eye on immediate cash-flow needs,” Rosenstiel said. “Near-term spending should be planned for accordingly with sufficient assets set aside in safer, more predictable investments or cash equivalents. This will allow you to access the funds while letting your equity holdings stabilize and recover.”

“The truth is,” she added, “there’s always good news and bad news if you dig deeply enough. ... There are a lot of things still going right for the U.S. economy. The underpinnings of the economic expansion remain – the housing market is high, consumer net worth is at an all-time high. As the pandemic wanes and economic activity is reopened, consumer spending is increasing.”

Let’s take that as a vote of confidence.

No Logic to How Market Swings Affect Individual Stocks

BY STEVE DINNEN

Signature Bank is a commercial bank based in New York that has been a solid performer, and I’m glad to own shares. But I got a little jolt on March 1 when the stock fell 8.9% for the day. That’s a big move. There was no earnings announcement, no earnings guidance, no ratings change—nothing to readily explain why that happened. Then from March 5 to March 7 it shed another 8.9%.

Just yesterday it climbed back 8.6%. That was nice. But why? Because these are volatile times for the market, a hallmark of geopolitical unrest. The market reacts to invasions, or thoughts of invasions, or thoughts of retrenchment, in outsized ways that drag along a lot of players. Ditto for interest rates and inflation (and Wednesday’s interest rate bump by the Fed).

On average, the market rises or falls less than 1% 70% of the time. A 2% up-down move happens 20% of the time, and 3% or more, 10%. But that’s the average of all the individual stocks. Yesterday, when the Dow rose 1.55%, my Ford shares added 3.24%. TradeDesk jumped 11.96% and Doordash a whopping 13.45%. Exxon shed 0.38%.

Welcome to the new world order. For the time being, anyway.

Investing in the Metaverse, the Internet's Next Frontier

BY MALLIKA MITRA FOR MONEY.COM

When Mark Zuckerberg announced his company was changing its name from Facebook to Meta late last year, he was met with a range of reactions, from mockery and skepticism to confusion and praise.

But to Zuckerberg, the reason was clear: "The metaverse is the next frontier in connecting people, just like social networking was when we got started," he wrote in a founder's letter at the time. With the creation of Facebook, the tech CEO proved he understands how people will want to communicate and interact with one another in the future. If he's right about the metaverse, our physical world will likely start merging even more with our digital one.

Zuckerberg isn't the only one betting on the metaverse. Companies like Apple and Microsoft are investing in the next frontier of the internet as well. Experts say it will be transformative.

"People should ask not what will the metaverse change but what won't it change," says Zeno Mercer, research analyst at ROBO Global. "There's not much that it won't change."

If you're looking to invest in the metaverse, here's where experts say to start. READ MORE.