Investing When the World Is Upside Down

Nothing really clears yesterday’s headlines off the world’s screens and front pages like a war.

Even more so an existential war between world powers, as we seem to be seeing in Ukraine.

The violence and heartbreak is devastating and unavoidable. No one can look away for even a minute from the spectacle of bombed out hospitals and burning tanks.

Beyond the blare of war imagery we find the inevitable drumbeat of negative economic consequences: Rising inflation, falling stock markets, and chaos around the globe.

So what is a thoughtful investor to do? Well, a lot depends on how you invested in the first place.

If you’ve been speculating on a small clutch of stocks, chances are you either got it amazingly right or terribly wrong.

Tech stocks were already taking a beating on the prospect of an increase in interest rates. Overall, the markets are recalibrating for a slowdown in trade, spending, and growth because of the conflict in Ukraine.

A few supposed “haven” investments, commodities such as specific metals and, of course, oil, are higher than they’ve been in years.

Bonds are anybody’s guess, though a rising benchmark interest rate should put a dent in bond prices. How the war fits into the Fed’s calculations, however, is anybody’s guess.

The alternative, of course, is investing in a broad array of stocks and bonds via diversified funds, such as index funds and low-cost ETFs.

If you’ve been widely diversified for a while now, chances are your portfolio is down but not dramatically so. If you’ve managed to own a variety of asset types, too, you may find that some are off their recent highs but others have held up.

Reckoning

The other important axis in this equation is time.

There are investors, mostly professionals, who view the markets as a daily scrum. They fight to avoid any losses at all, day in and day out.

But that’s not most investors. Most investors are aiming at a much farther target — retirement, or big expenses still years away, such as college tuition for a child.

For those investors, a market pullback, whatever its trigger, is not a disaster. It’s a bump in the road.

A decline in stock valuations thus can represent an opportunity more than an obstacle. If you are regularly contributing to a retirement plan, your dollars now buy more than they did a few weeks ago.

Over time, the strong likelihood is that recent losses will be reversed, and those dollars invested in meantime will be more valuable still.

Stocks had risen quite a bit since the bottom of the pandemic, which now feels like ancient history considering events in Europe. Stock prices were, perhaps, overdue for some kind of reckoning.

Yet nobody knows the way forward, and no one can predict the position of the stock market in six months, 12 months, even weeks or hours at times.

Nevertheless, you can refocus on your ultimate goals, and if those goals are years away the setbacks that come with a global conflict can be ignored for now.

The world changes, and it will change again — hopefully for the better and toward peace.

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