The S&P closed in correction territory Tuesday with all 11 sectors down, as market participants continue to be concerned about inflation, higher interest rates, higher energy prices (brent crude hitting its highest price level in eight years at close to $100 a barrel), and of course Russia's invasion of Ukraine.
S&P 500 Chart
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Couple of items to keep in mind:
On average, the market typically has a correction roughly every two years (there have been over 36 of them since 1950)
Energy markets are global. With Germany halting the certification of the Nord Stream 2 pipeline from Russia, expect higher prices in Europe to have an impact on U.S. consumer prices (which were already up 27% from the prior year in January).
Markets can be sensitive to geopolitical events, but prices quickly adjust to incorporate the impact of these events on economies and companies. Case in point: according to the Peace Research Institute Oslo (PRIO), there were 56 active conflicts recorded in 2020, 8 of which were classified as “wars”…global markets overcome these and a pandemic to finish with strong positive returns.
Broad based diversification across geographies, investment vehicles, asset classes, risk factors, etc. are the best way in our opinion to build a robust all-weather portfolio that allows investors to stay the course and reap the long-term rewards markets have provided over time.
As adherents of broad diversification in global markets, our clients may have concerns specifically about Russian/Ukrainian exposure in their portfolios. Our portfolios do not have direct exposure to Ukrainian equity or fixed income. Russian exposure is less than 1% across our funds, and models.
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