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What Does War in Ukraine Mean?

We have been watching the details in the Ukraine unfold, just as you have.  We are not political theorists or commentators, so we are not going to try to give our readers a synopsis on why the developments between Russia and the Ukraine are happening.  All we care about, as professionals, is solely to focus on our client’s best interest.

Since the beginning of 2022, the markets have been dismal. The push-pull between inflation and waiting for the Fed to address that with raising interest rates has weighed on the markets, as have the continued supply-chain issues. There has been a clear unfavorable attitude towards growth stocks (ie technology) and we’ve seen bond prices retreat a bit in anticipation of higher interest rates. But with the events of the last 24 hours, we believe the impact will affect all of the above, and perhaps give reason for the Fed and investors to quickly re-consider the above set in stone course we were expecting.  What does that mean? One could argue that what has happened in the price of gas prices and oil prices was avoidable, but for twelve months ago the US energy independence was stripped away with the stroke of a pen, unfortunately. But it is what it is. That means the price of oil is now quoted at over $105 a barrel, and gas prices at the pump will rise. This by default means a slowdown in the US consumer spending because this is a large tax on US consumers who now must spend significantly more for gas than a month ago, and grossly more than 12 months ago. This is a natural slowdown that may force the hand of the Fed to leave rates alone and let the tectonic forces of the economy shift around on their own.

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We base our assumptions on modern history of Russian activity, namely the annex of Crimea which was a couple of difficult days for the world, and the markets, but then over, and a strong upward reversal. 

We’ve watched this market correction over the last several weeks, and yes, we still believe this is a correction and not the sign of some major catastrophic course.  Normal, natural, and long overdue, which is why we have tried to stockpile cash and wait for buying opportunities for those who are patient. In fact, we’ve borrowed a chart from respected economist Ed Yardeni, who yesterday us that one of the best contrarian indicators is when the bears are running on the street.  The bull-bear ratio indicator is now almost at 1.  That means equal numbers of investors who are in the bull and bear camp. This ratio will fall below 1 today or tomorrow, and this is an extraordinarily strong indicator for an upward reversal, and historically a strong buy signal that must be grabbed by those who have been waiting for real position entry points.

These are never easy times, they are stomach churning at times, but to be honest, after all these years we have seen much worse. And yes, some will say, “this time is different,” but sadly, we are too jaded now to think this way. We have seen enough “different” to know in fact, all these downturns are the same. Just look at the charts. Those who buy when the streets are flowing with the carnage of the fearful, will smile six months are a year from now.

If you have any questions, or concerns, please do not hesitate to call your advisor. We are, as always, grateful for your trust and faith in us.

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