With the news of Russia’s invasion of the Ukraine, the economic impact of the conflict has already been felt.

The political factors involved in Russia’s military action against its neighboring nation are complex and date back to the Second World War. We recognize that this is not a simple situation that can be explained away from a financial perspective either. But with so much uncertainty, the focus that we have is the impact that this news will have on our clients. We do hope that all those involved and affected by these circumstances, whether Ukrainian, Russian, or otherwise will come to a swift and peaceful resolution.

 The invasion’s implications for global growth and the prospect of new, harsher monetary policies mean there is a lot of uncertainty in the markets right now. While the markets started off very rocky with the S&P500 down over 2% this morning, sentiment quickly changed. The markets appear to have absorbed a lot of the fear. After early the losses this morning (Thursday, February 24), The S&P, Dow Jones, and NASDAQ all rebounded close in positive territory.

Impact of Canadian Economy:

Commodity prices are likely to have the most significant impact on Canada’s economy. The price of oil is widely expected to rise given Western sanctions against one of the World’s biggest energy producers.

 Canada and Russia actually have little direct trade so the impact on imports and exports could be relatively small

The graph below shows Russian Exports to Canada in 2021 totaled a little over $2 billion – a fraction of Canada’s trade when compared with most other nations.

Our Advice:

We are constantly reminding clients that they are long-term investors and it is certainly not the time to try to time markets. There will always be noise — pandemic, war, financial crisis — but if history teaches us anything it is that we recover.

During the 2008 financial crisis, were clients that held on rewarded? What about during the Arab Spring in the early 2010s? How about during the Covid-19 downturn of 2020?

 Yes.

In all these scary headline events, doing nothing was the best course of action.

This is a reminder of why we need to have a well-balanced portfolio that is designed to weather the storm, whatever that is. The long-term goal is to capture market upside, but more important than that is limiting downside participation.

For our clients who have a well-diversified portfolio, we see this as another bump in the road that does not change the plan. Clients that are currently heavy in oil or other energy stocks may have an opportunity to ride the wave up, but we encourage them to set a floor just in case things invert.

From our perspective, these moments also present opportunities to rebalance portfolios and, as a result, implement basic investing principles of buying low and selling high.

It’s time in the market, not timing the market.

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