Broker Check

Monday Money Report

| February 21, 2022

Oh my.  Last week the markets were down again, wiping out gains earned in the last six months. The market is reacting to fears of Russia invading the Ukraine. Why does that matter? The Ukraine has many natural resources, and Russia provides energy in the form of natural gas and oil to much of Europe. Geopolitical unrest can affect commodities – all the natural resources.  And energy prices spiking in Europe will drive inflation even higher.

But in the bigger picture, does it matter? Speaking strictly from a financial markets and not humanitarian or geopolitical stand point, are people going to stop going out to eat? Stop buying cell phones and cars, TVs and clothing? Consumer spending drives 70% of the US economy. And that’s not affected by what happens in the Ukraine.

In the long term, financial markets make sense and behave rationally.  Companies either produce goods and services people want, and therefore create profits and drive the company value higher, or they don’t.  Their products or services are not successful, and the company fails. In the short run, emotions affect the market. Is Apple or Ford or Starbucks worth less because of conflict in Ukraine?  Probably not.

There are a few things you can do. First, if nothing else, ignore your statements. If you’re investing into your 401(k), TSP, or other accounts, keep doing it.  You are buying things on sale. If you have cash sitting on the sidelines (after debts are paid off and your emergency fund is full), this is a great time to invest. If you are a retiree and need your investments to provide a paycheck, talk with your advisor.  Distribution portfolios are vastly different than accumulation portfolios. There should be some cushion so that you’re not forced to sell investments at a loss to generate your next month’s pay check. If you have an after-tax investment account, take the time to evaluate your holdings.  You may want to harvest tax losses or make changes to your portfolio and can take advantage of this downturn to do so more tax-efficiently.

Remember that buying low is like eating cold, mushy green beans.  It’s pretty unappetizing, but it’s really good for you.

Your action item to take this week is to increase the amount going to your emergency fund.  Even a small increase builds your savings over time. Having money available outside of your retirement accounts is both defense and offense. Defense against all the stuff that can happen: appliance failure, car breakdown, illness, job loss. And offense in that you have money available to capitalize on opportunities that arise.

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Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.  This information is not intended to be a substitute for specific individualized tax advice.

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.