Being fearless in fearful times

The market feels like it’s at a tipping point, especially with the tragic situation unfolding in Ukraine. If you’re feeling overwhelmed and saddened by the headlines, you’re not alone.

Change and uncertainty are two constants in the world of investing.

But right now, those two constants feel almost unbearable.

A fearful market

Life is especially unpredictable these days, and the future of markets feels just as unstable. Inflation is historically high. The job market is historically strong… or is it? Because all you see are empty shelves and long lines. Wall Street’s smartest minds barely understand the economy, with economists regularly miscalculating the pace of inflation and job growth. The Fed may surprise us with rate hikes.

Now, Russia and Ukraine are at war, and fear has (understandably) gripped the market. In fact, investors are the most uncertain they’ve been about the future of the market since May 2016, according to a weekly survey from the American Association of Individual Investors. 

It’s an overwhelming environment to invest in, and it’s hard to know what happens next. But while we can’t predict the future, we can tell you what we’re watching in the days ahead, to gauge how much the Russia-Ukraine conflict could affect the global economy. In the end, the economic impact could dictate where markets go next.

Oil prices

Greater uncertainty and high inflation mixed with the spike in oil prices could be a toxic situation for the US economy. While we believe strong consumer demand could help the economy overcome these headwinds, there’s a higher risk that the Russia-Ukraine conflict could weigh on growth.

The Federal Reserve

The Fed may have to walk an even thinner tightrope at its March meeting. Markets have largely moved away from expecting a big and drastic rate hike, and they may be right. Still, the Fed has a strong argument to raise rates with inflation running hot and oil prices spiking.

The market’s mood

Global markets are in the eye of a storm right now, and as with any crisis, the market’s mood is unusually negative. Fear can be a contrarian indicator for markets. Since 1990, when fear and uncertainty has risen this high (per AAII data), the S&P 500 has averaged 18% returns in the following 12 months.

Investors are expecting the worst — and while the worst-case scenario seems to be playing out — any easing of tension or uncertainty could boost markets.

Embracing your fears

We don’t know what the future holds for markets, the economy, and (frankly) life. However, when the world feels uncontrollable, it helps to anchor your perspective on your needs and goals. Control what you can control.

If you’re worried about the future and have short-term goals, it might be time to move into cash or less risky investments. 

It could also be a good time to embrace patience. It may take time for the market to process what’s happening. But as history has shown us, humans are resilient, and society can overcome tragedy. And the stock market has followed suit. The S&P 500 has fallen 10% or more 33 times since 1950, but it’s also logged 8% annual returns since then.

Control what you can control

One way to take the emotion out of investing is through a dollar-cost averaging approach, in which you invest a set amount of money on a regular basis, not based on headlines. Again, controlling what you can control. 

First and foremost, take care of yourself. No investment is worth risking your sanity.

And remember: you — and your portfolio — are likely more resilient than you think.


*Data sourced through Bloomberg. Can be made available upon request.