Ukraine and Other Matters (2-22-2022)
We are living in a trying time for us and for the world. When the pandemic began in 2020 it took a great deal away form each of us. Since that time people we know became ill, loved ones passed away and our sense of freedom and purpose was shaken. In the United States, there was action by the Federal Reserve and Federal Government to mitigate the toll of the pandemic on the finances of our citizens. As we slowly climb back, we find we are facing a high rate of inflation, conflict with China and a destabilizing situation in Ukraine, brought about by an oligarch’s quest for power and supremacy. All of the above create uncertainty. Investors do not like uncertainty!
At the beginning of this year, for those clients for whom I have discretion over their accounts, I made significant changes in both the asset allocation and the investments. These changes were made due to my belief that inflation would continue, raising bond interest rates, and that large tech companies, which dominate index strategies, would falter. The duration of bonds was shortened, and inflation adjusted bonds were added. I raised our investments in value stocks, significantly reduced the allocation to index stock positions and introduced managed large stock investments to IRA plans. I also reintroduced real estate to most plans as an alternative to stocks and bonds.
I regularly review our investments and asset allocations. In the current environment, with Russia playing brinkmanship with Western Europe and the U.S., I went back and reviewed your investments. I looked at how the Euro was doing against the dollar. The Euro, in this crisis is up today. I also noted that J.P. Morgan was adding Ukraine to their emerging market index, and it seems likely similar indexes will be following suit. It appears that Western European countries are going to follow the U.S. lead and levy sanctions on Russia. It doesn’t appear that they, nor the U.S., want to commit to troops on the ground.
With this as a backdrop, it is best to remain positioned now using the current allocations. As always, I am following both investment and world events and am prepared to act if it becomes necessary. In the current case, if swift action is needed, it may result in clients not being notified until after the action is taken.
February 22, 2022