The Driving Fear of the Russia-Ukraine Conflict

By Sarah Carlson, CFP®, CLU®, ChFC®

Fear is here. The driving fear of not escaping the events of the recent Russia-Ukraine conflict. The current situation is outside the likely worst-case scenarios most observers anticipated. You may be experiencing guilt that you, as an American, do not live in a place that is under attack. 

You don't need to be hearing the bombings to experience stress over these events; it is readily available on social media and news outlets. Feeling the driving fear of the turmoil is rippling through our entire world and is another indication of how interconnected we are in information and supply chains. 

Stress causes us to want to run, fight, or hide. Ukrainian citizens are swimming in these fundamental emotions as their basic safety and lives are at risk. Your stress may be caused when you open any news outlet or turn on the television, you will see truly heart-wrenching stories of people and events, and it is bound to stir your emotions. 

You also may be stressed when you check your investment account, and you see there has been a sizable decrease over the last few months, and it is difficult to predict what will happen next. It's not comfortable, and that is okay to acknowledge.

The market is in turmoil not because of market fundamentals but because of the Russia-Ukraine conflict. We don't know how long it will last, but we have historically lived through similar wars. What can you expect to experience during this wartime even though you may be far away from the soldiers and guns?

1. Inflation: Higher gas prices. According to AAA data gas prices hit record levels. Long-term inflation will have a problematic impact on our economy because it will continue to drive other prices up with no end in sight. It will cost more for goods and services to get to you.
2. Higher grain prices: Russia is one of the world's leading exporters of wheat, and with recent sanctions, that means your cereal and bread will be more expensive.
3. Volatility in the market: Although the fundamentals of the economy had a good foundation going into this conflict, we are seeing the psychology of fear in human behavior taking shape in buying and selling right now. This market fear translates into higher volatility.
4. Currency fluctuation: Many investors are looking to stabilize their currency, so everything from the dollar to cryptocurrency will most likely continue to fluctuate.
5. Gold prices, metals: Gold and metals historically have increased in value during times of uncertainty. Remember, gold cannot easily be converted to cash without transaction fees.
6. Continued supply chain disruption: Pricing is based on supply and demand. We still have supply chain issues that will cause things like semi-conductors to be in short supply, and such essential items like cars or computers cannot be produced without the chips for their software.

Conclusion

The Russia-Ukraine conflict has hit the global economy in a place where it was already vulnerable due to the effects of COVID-19: inflation. While higher commodity prices and inflation will weigh on global growth, the U.S. remains well removed from a potential recession even if risks have increased. We will get through this, and it is essential to take care of your whole self: mind, body & spirit while overcoming adversity.

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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.