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How to weather *this* storm

There’s going to be a lot - and that’s saying something right now - of turbulence in the markets tonight and tomorrow. Here’s why:The west has implemented a package of sanctions with the aim of pressuring Vladimir Putin to stand down from his invasion of Ukraine. The two main components of this are blocking Russian lenders from SWIFT (this is the financial messaging system banks use to talk to each other) and cutting off Russia’s central bank access to its offshore assets. This will make it very difficult to finance their war effort for very long, but of course the thinking is to ramp up the heat internally, from the Russian public and the oligarchs, who reportedly are not really on board with the invasion. This will likely cause a bank run (it has already begun) and could lead to the collapse of the banking system. The ruble is becoming less valuable right now, by the minute, as everyone tries to exchange them into something else. Consider the USD/RUB exchange rate: the number of rubles you would need to buy one US dollar. For the past year, it’s usually hovered around 70-75. Last week as it became clear an invasion was imminent, the rate climbed to 84. As I write this, the foreign exchange markets are not yet open, but the expectation is that the price at the open will be well north of 100. And these are wholesale, dealer prices - everyday Russians will need to pay much more. So you see how situations like this can lead to a panic spiral. 

But that’s in Russia - what happens to you? Directly, in the immediate term, nothing - this won’t lead to a bank run here and Russia can’t retaliate against the US or the EU in that way. It will likely lead to more inflation for a time as energy prices are affected, particularly in the EU - Russia is a major supplier of natural gas to the world. Other commodities like wheat and corn will also get more expensive since Ukraine and Russia accounted for a substantial portion of these too. 

And we are probably in for a lot of gyrations in the financial markets. That’s nothing new, certainly not this year. I am not concerned about portfolios that are well-positioned to align with your long-term goals. It could mean that US stocks are seen as a safe haven and relatively insulated from the reverberations this will all surely cause - after all, money still needs to go somewhere, so expect a lot of inflows into US Treasuries (the safest of safe havens). Keep in mind that generally within a year of such events, the stock market was well higher than before the crisis. 

My concerns are around the fog of war, and information warfare. Watching this all unfold in real-time - the courage shown by everyday Ukrainians, led by President Volodymyr Zelensky, to defend their country and resist the invasion is nothing short of heroic - has been riveting. But with things shifting by the moment and limitless sources of news, there is a lot of dis- and misinformation meant to confuse and destabilize. Please be aware of that as you consume information. One of the worst aspects of rapidly developing crises like this is the ease of exploiting people’s good nature and desire to help, using fake charities and scams. Please be wary before donating money, do not click on links you’re unsure of (even the below - Google the organization instead and follow that link instead), and help those, like older loved ones, who might be particularly vulnerable to illegitimate requests. 

It seems almost wrong to be talking about markets and portfolios now, but pretending this isn’t all creating stress and uncertainty isn’t useful. So, as far as your portfolio and financial plan are concerned, recognize that we always plan for uncertainty and volatility, even if we can’t predict what form it will take. Most importantly, there are innocent people’s lives hanging in the balance and there are legitimate ways to help:  


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