Hope all is well with you. I wanted to start off with a quick scheduling note. I will be out of the office 3/8- 3/18 and will not be available for appointments however, I will be checking and responding to emails and voicemails. The U.S. stock indexes retreated, their declines weren’t nearly as sharp as those in Europe, where Russia expanded its invasion of Ukraine and energy prices surged. The S&P 500 and Dow fell more than 1%, the NASDAQ dropped nearly 3%, and indexes of some European countries declined more than 10%. After what’s been a tough couple of weeks I thought a little levity might be helpful, I have broken down this week’s news using quotes from the movie Old School.
Putin and the Russian economy are feeling the consequences of breaching the world’s trust. The currency is collapsing, and the Russian stock market is tanking. It reminds me of 1998, my first year in the business, that summer the market dropped as the Russian ruble and its stock market plunged. The Russian government eventually defaulted on its debt as their GDP declined sharply. Following a 90% rise in the S&P 500 powered by rising technology stocks, the stock market fell 19% in 30 days. Once we got through the crisis, stocks finished 1998 with an annual gain of 29%, and gained another 21% in 1999. The lesson stay invested. Elevated market volatility indicates there is a lot of pessimism priced into the markets. It is possible we experience further near-term weakness, but a good portion of the risks are already reflected in the current stock-market correction. Corrections tend not to become bear markets when economic growth remains positive, which it is.
Putin and the Russian economy are feeling the consequences of breaching the world’s trust. The currency is collapsing, and the Russian stock market is tanking. It reminds me of 1998, my first year in the business, that summer the market dropped as the Russian ruble and its stock market plunged. The Russian government eventually defaulted on its debt as their GDP declined sharply. Following a 90% rise in the S&P 500 powered by rising technology stocks, the stock market fell 19% in 30 days. Once we got through the crisis, stocks finished 1998 with an annual gain of 29%, and gained another 21% in 1999. The lesson stay invested. Elevated market volatility indicates there is a lot of pessimism priced into the markets. It is possible we experience further near-term weakness, but a good portion of the risks are already reflected in the current stock-market correction. Corrections tend not to become bear markets when economic growth remains positive, which it is.
President Biden’s first State of the Union started off with fighting words and tough talk for Russia. However, the rest of the address left a lot to be desired. He did not ask Congress for the greater defense spending it may take to restore world order. He did not offer a vision of how NATO could counter the Russian threat in the longer term. Instead, he pivoted to a long list of familiar domestic proposals. Disappointingly, his remarks on inflation basically rehashed spending initiatives and offered the questionable logic that shifting supply chains back to America necessarily cuts costs. The good news here is that the Federal Reserve is competent and seems to know what they’re doing and I have confidence we will get inflation under control in most areas except at the pump.
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