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War - What is it good for?

War - What is it good for?

| February 25, 2022
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As the song goes – Absolutely nothing.  War brings uncertainty, suffering, death, destruction, human rights infringements, and too many other terrible outcomes to mention them all.  This is not to say that war is never justified – sometimes it is.  Sometimes it is necessary to defend against aggressors and tyrants.  But, there is no arguing that peace is better than war.

I was talking to a friend and client yesterday and reflecting on my shock to find that we still live in a time when sovereign nations can invade other sovereign nations.  To most of us, Russia’s actions in Ukraine feels like a throw-back to the early 1980’s when Tom Cruise and Anthony Edwards were giving Russian MiG-28 fighter pilots the “Bird” – you know, the finger – while flying inverted over unspecified Communist territory.  It’s a great scene for the movies, but this does not play well in the 21st century real world.  Understandably, we as world citizens, and as investors, are concerned.  What impact will this have on the world order, the global economy, the investment markets, my retirement?

To be clear, I am no expert in geo-political conflict, military strategy, or the global world order.  I am not even sure that the “experts” have all the answers.  Here is what I do know in my capacity as a financial advisor:

  • No single event – good or bad – has ever been able to re-write the rules for effective long-term investment strategy. See this as an illustration.
  • The investor who stays committed to a diversified approach for their investments does better on average than the investor who makes big “moves” in their portfolio based on the news of the day.
  • The incentive to produce, innovate, and improve quality of life has always overcome the obstacles to global economic progress.

I have heard many ideas over the past couple of days since Russia crossed the borders with military force into Ukraine about what “to do” in investment portfolios.  “Decrease international exposure”, “Stop 401k contributions”, “Cash out and go to the sidelines”, “Buy a CD”, “Buy an annuity”, “Just do SOMETHING”.  None of these ideas are very good ones, and they are all fraught with their own risks because nothing is ever a guaranteed winner.  Also, none of these ideas correspond with the truth in points 1 thru 3 above.

The Russian invasion of Ukraine is bad news.  It is bad news economically as it may be a regression of the globalization that spurred dramatic economic growth over the past 4 decades.  It is bad news humanitarianly as it will upend – and possible end - the lives of innocent people trying to live in peace in Ukraine.  It is bad news geo-politically as it marks a continuation of the shift away from cooperative government and self-interested tolerance.  However, remember this – bad news does not always beget bad news.  In this case, I suspect at some point cooler heads will prevail and that we’ll be talking about something else 12 months from now – probably sooner.

In the meantime, say a prayer for the people of Ukraine and the people of Russia, for that matter, who are being ruled by a megalomaniac authoritarian.  And, do not hesitate to reach out to us with your concerns and planning needs.  We are here to talk and plan with you through it all.

  • Investors should be aware that investing based upon strategies or models does not assure a profit or guarantee against loss.
  • Investing in securities involves risk, including the potential loss of principal invested.
  • There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.   
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