I don’t know what the future holds, but I know who holds the future.
- Ralph Abernathy
A case can be made that we’re encountering more uncertainty now than may have been faced in 100 years. In no order of magnitude or significance, today we have a lingering global pandemic, political unrest and division, a rapidly changing climate, potential war in Europe, rising interest rates, supply chain issues, inflation and…potentially a shortened baseball season! It’s tempting to give in to all of these uncertainties and call it a day… move to cash and move to the country. And while that can certainly be called a “strategy", it’s likely not the one that you set out on with your clients or with your practice.
Instead of strategy abandonment, we think now is the time to affirm the foundations of a strategy…and keep your focus on the long term. And in this case, we’re talking about your relationship strategy. We believe that relationship development is a strategy, and in these times of uncertainty, your relationships with your staff, your clients and even your broker/dealer may need a little extra attention. Now is not the time to abandon the strategy.
We’re not advocating ignoring todays signals and signs…to do so would not be prudent or in keeping with fiduciary expectations. Pay attention to the events but temper them with a long-term view and a commitment to strategy. Your voice is important and impactful with your clients and now perhaps more than ever, silence is not what they need to hear from you. There are many investment strategies one can put into place, but perhaps the most important investment you can make is in your relationships. We’re here to help…
War in Ukraine weighed on stocks as investors assessed the economic impact of continued hostilities, expanding economic sanctions, and potentially higher inflation due to rising oil prices and new stresses on the global supply chain. The Dow Jones Industrial Average fell 1.30%, while the Standard & Poor’s 500 lost 1.27%. The Nasdaq Composite index slid 2.78% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 3.21%.1,2,3
Another Volatile Week
The uncertainty introduced from Russia’s invasion continued to whipsaw the financial markets last week. Intensifying hostilities early in the week sent stocks sharply lower as oil prices surged and a flight to safety drove investors to buy bonds. Stocks rebounded mid-week following the release of positive economic data and Congressional testimony by Fed Chair Jerome Powell, who said the Fed is likely to move forward on rate hikes, but would proceed cautiously. Investor enthusiasm was short-lived, however, as stocks resumed their decline on Thursday into Friday despite a strong employment report.
Fed Chair Powell told Congress on Wednesday that he would propose a 25 basis point increase in the federal funds rate when the Federal Open Market Committee meets in mid-March. He conceded that the invasion of Ukraine and the economic sanctions against Russia introduced a level of uncertainty and that the Fed would proceed carefully with monetary tightening. Powell also testified that he would not have the Fed’s strategy to shrink its balance sheet finalized before the mid-March meeting. Alluding to the urgency of fighting inflation, Powell left the door open to more aggressive rate hikes later in the year.4
1. The Wall Street Journal, March 4, 2022
2. The Wall Street Journal, March 4, 2022
3. The Wall Street Journal, March 4, 2022
4. The Wall Street Journal, March 2, 2022