14 March 2022

The recent news regarding the Russian-Ukrainian conflict may have you wondering about your investments. It is important for us to go back to the basics of investing, as these tragic events can elicit strong reactions, which is perfectly normal.

As the Russian invasion of Ukraine continues, the world is watching a human tragedy unfold in real time. Events of this scale create myriad concerns, including for financial markets. To get a better sense of how the conflict is affecting those markets, we sat down with Michel Doucet, Vice-President, Investment Strategist and Discretionary Wealth Manager at Desjardins Wealth Management.

The media is making a big deal about stock market fluctuations. What’s the best attitude for investors in these circumstances?

It can make sense to review your financial plan during times of market volatility. What’s your actual tolerance for risk? Does your financial plan make sense for the things you want to do? But above all, don’t react impulsively. Don’t let your emotions get the best of you. People should try to remove all emotion when they manage their money. Panic selling can have a long-term negative impact on wealth. It’s hard to decide on the right time to get back in the market or an investment once you’re out.

There’s fighting in Ukraine, a stream of refugees fleeing West, and the Russian and Ukrainian economies have been hit very hard. Will this depress the markets for the foreseeable future?

With the exception of the Second World War and the attacks of September 11, 2001 (which coincided with the bursting of the dot-com bubble), armed conflicts have generally had a limited impact on stock markets. For example, it only took 31 days for the markets to bounce back at the start of the Vietnam War, and only 9 following the Cuban missile crisis. Generally speaking, geopolitical events have a relatively short impact on markets. So staying calm is key. Try not to let the way you feel about the tragedy in Ukraine affect your decisions about your finances.

Should there be concern about a major market correction if the conflict continues for some time?

First off, let’s remember that the Russian and Ukrainian economies represent 3.2% and 0.4% of global GDP, respectively. As of March 7, 2022, the TSX has gained 0.8% this year. The S&P 500 has dropped 11.6% in the same period. Since 1981, the intra-year decline (average of largest corrections) for the TSX is 16.5%, and 14.5% for the S&P 500. In other words, the variances of the TSX and the S&P 500 are very far from their average intra-year declines.

Remember, the key to success is to have a plan that is tailored to your needs and an investment portfolio that is well diversified to deal with the disruption in the economy. 

“The stock market is a device for transferring money from the impatient to the patient.”

– Warren Buffett

Source : Desjardins news article