Feb 24, 2022

Russia Invades Ukraine: Three Things to Remember, Three Things That Remain Unanswered, Three Things We're Doing

Russia Invades Ukraine: Three Things to Remember, Three Things That Remain Unanswered, Three Things We're Doing

Russia’s full-scale invasion of Ukraine today has sent global markets tumbling. At the time of this draft, European stocks are down 4% and U.S. futures are down more than 2%. Quite obviously, global geopolitical conflict of this nature is nuanced and varied and we’re not here to breakdown every aspect of Vladimir Putin’s hostile takeover, but we do want to frame the issues a bit.

We discussed the matter at length today on the Morning Market Briefing. You can listen to the podcast by clicking here. In addition to the resource above, and in light of the current state of affairs, here are three things to remember, three things that remain unanswered and three things we’re doing in portfolios.

Three Things to Remember

  1. The market has been pricing in the odds of this conflict for several weeks. The S&P 500 is not down 11.16% in isolation, and while rate hikes caused discomfort for equities in the opening weeks of the year, the Russia-Ukraine conflict has dominated headlines throughout February.
  2. U.S. equities should be relatively resilient. Yes, today is going to be ugly. Yes, 2022 has been ugly thus far. In the grand scheme of things, however, U.S. exposure to Russia and Ukraine is relatively small. The market hates uncertainty and the extent of this conflict is uncertain (more on this in a moment), and there will be rockiness. But we’re not expecting Target or Home Depot or Apple or JP Morgan to go out of business because of these issues.
  3. The Fed is still likely to raise rates in March. The expectation for the Fed to push through a double rate hike has fallen this morning, but the expectation is still for a rate hike to come in March and an additional 4-5 hikes to come through this year. This is, despite market turmoil, the right move to combat inflation. There are problems the Fed can (attempt to) fix, Putin isn’t one of them. Ultimately, the rate hike situation remains the single biggest economic story in the United States, in my opinion. The Fed isn’t going to surprise anyone by not raising in March.

Three Things That Remain Unanswered

  1. Will sanctions matter? President Joe Biden convened his national security council this morning and is slated to announce a set of sanctions on Thursday. Will those sanctions matter to an autocrat with a fortune worth hundreds of billions of dollars? The threat of sanctions certainly didn’t seem to deter Putin. What will the new list look like? How targeted will it be? Will it effectively cripple the Russian economy without impacting the rest of Europe? Will Putin care?
  2. Will this conflict spread? As Ben pointed out on the call this morning, it is interesting to see which nations have not condemned the invasion. Will the likes of Iran, Belarus and China more directly support Russia? Will Russia go past Ukraine in seeking to restore its past glory? Or will this be a story that fades to the background?
  3. How much will this impact inflation? Crude oil is up more than 50% from a year ago and is up nearly 8% to $100/barrel today. Natural gas prices are spiking. How much higher can prices go and how long will they stay there?

Three Things We’re Doing

  1. Staying tight on asset allocations. Bonds are up quite nicely today and for the first time in a while, we think clients are probably happy to see them in the portfolio (don’t tell Tom I said that). Our approach to asset allocations is strategic and based on the varied nature of markets. At times like this it is important to stay disciplined to Investment Policy Statements and take advantage of opportunities.
  2. We’re buying stocks. As mentioned earlier, stocks are down quite a bit today and some of them shouldn’t be. We are rigorous in our analysis and detailed in our setting of price targets. A large cross-section of equities are performing well (per recent earnings announcements) and poised for value creation. We are picking up those opportunities.
  3. Communicating with clients. We will continue to broadcast live on zoom every morning at 8:30 to provide market commentary. We’ve done this for two years and it is a drastically underutilized resource. We are reaching out to clients and answering questions as they come in. We are confident and convicted in our approach to investing, but that means nothing if clients are not as well. Please allow us to chat with you if you have concerns.

As always, we are grateful for the opportunity to work with each and every client we have. We do not take this responsibility lightly and we are working diligently on your behalf. Please do not hesitate to reach out.

Andrew Hall


Andrew’s career with Narwhal began as an intern during the summers of 2008 and 2009. He was hired in a full-time capacity in 2011. Andrew oversees the strategic direction of the firm and enjoys a role split between portfolio management, client engagement and operations. He previously served on the Advisory Board for the Mercer University Student Managed Investment Fund and completed the Charles Schwab Executive Leadership Program as a member of the 2019 class. Andrew and his wife Amanda live nearby in Marietta with their two kids.

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