While Russia invading Ukraine is attention grabbing and concerning from a humanitarian standpoint, historically, geopolitical events have been one of the least effective inputs for making investment decisions.
We feel that in time, this situation could prove non-relevant to investors’ long-term portfolio performance.
In our opinion, the two main driving forces of the current overall global economy & markets are:
- The on-going reduction of what was been record fiscal & monetary stimulus worldwide.Market expectations have increasing grown of late for more Federal Reserve rate hikes in calendar year 2022. Even the European Central Bank is discussing rate hikes…although we still feel this is highly unlikely by the ECB any time soon. Various other central banks have already been steadily raising rates since last year. It’s is completely normal for markets to go through a digestion period in this type of policy transition environment. We don’t believe this automatically means a severe bear market is to come solely as a result of tightening policy. It’s important to remember that the Fed is raising rates because the economy is very strong not as a result of weakness.
- The increasing normalization of the global economy post-Covid is still underway.In our opinion, this could be a tailwind to select investment opportunities going forward this year. Unlike the US, most of Asia has remained firmly locked down under restrictive pandemic policies. This has complicated the global supply chain and depressed consumer sentiment outside of the US. As all lockdowns eventually come to an end, this should support economic growth around the world.
As always, if anyone would like to dive deeper on any topic related to the global markets, please feel free to reach out to our investment team.
Ryan Mumy, CIO, CIAS
Capital Investment Advisory Services, LLC (“CIAS”)