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Perspectives on current events

Perspectives on current events

February 25, 2022
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There is plenty to worry about these days.

Top of mind is the conflict between Russia and Ukraine, and the energy and economic disruptions likely to follow. Closer to home, high inflation persists, and the Fed is preparing to tighten monetary policy.

And while Covid is moving away from the front page, the markets have a lingering worry that another variant could emerge. Before long, the midterm elections will begin making headlines as well, as candidates take positions.

Add it all up, and you see the S&P 500 teetering on correction territory as some investors ponder the best way to ride out the next few months

Some key takeaways from the last twenty-four hours as outlined by Kara Murphy CFA, CIO Kestra Investment Management...

  • Oil markets are most impacted by Russian invasion of Ukraine, European equity markets selling off
    more than US
  • US equity markets are seeing technical weakness- but important to remember that this began well before Ukraine invasion
  • Fed tightening cycle will remain the primary concern for the market, absent a full-out war with US and China involved, which we don't see as likely
  • Previous invasions have been good buying opportunities for S&P 500
  • The Russian economy is small relative to the global economy, markets there are reacting very negatively, and any US sanctions will hurt the economy (and the oligarchs) further. Even though Russia benefits from high oil prices, these other financial costs will likely limit Putin’s ability to have a lengthy military assault.

While all this volatility and uncertainty may have you feeling lost, please also allow us to present to you some rationale for 'What Could Go Right?', thanks to insights from Michael Kantrowitz, CFA, Chief Investment Strategist, Piper Sandler.

  • Stocks are down due to lower P/Es, not earnings. P/E-led bear markets (i.e., fear and uncertainty) tend to see V-shaped rebounds.
    • While stocks are down 11% already this year, the earnings backdrop has remained robust. Of course, there are reasons to be concerned today given all of the current macro risks, and that’s why P/Es can decline. That said, they often rebound as quickly when the risks improve, or investors just become numb to them (complacency).
  • There are 5 macro forces that are weighing on stocks (rates, oil, Fed, weaker PMIs, CPI).
    • An easing in any one of these could help stocks stabilize.
  • A market rebound is a real sweet-spot opportunity for QUALITY GROWTH stocks as they’ve been punished alongside the low-quality growth sell off.
    • Moreover, the combination of a slowdown in earnings and flat to lower LT interest rates makes it an attractive risk-reward. We would begin to buy growth stocks with higher levels of profitability now … just in case something goes right!

If nothing else... One can hope that History Repeats!

Geopolitical crises can certainly lead to rapid sharp corrections in the market. That said, major crises of the past saw short-term sell offs that were all great buying opportunities.

We understand that current events can be a bit overwhelming, and you may feel the need to be proactive. But remember, we created your financial strategy based on your goals, time horizon, and risk tolerance, and we anticipated there would be unsettling events along the way.

In the meantime, our thoughts and prayers are with the people of Ukraine, and anyone impacted by the crisis.

With all good wishes,

The Evoke Team

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC.  Investment advisory services offered through Kestra Private Wealth Services, LLC.  Evoke Wealth Management is a member firm of Kestra Private Wealth Services, LLC, an affiliate of Kestra IS.  Evoke Wealth Management and Kestra IS are not affiliated. Investor Disclosures