There are plenty of causes for concern these days. Fighting between Russia and Ukraine is causing supply chain interruptions, the Fed is raising interest rates to combat inflation levels we haven’t seen in decades, and all of this is sure to eventually affect the S&P 500. Most of us have probably already noticed some of these effects at the gas pump and grocery stores, but you may be wondering if any of this is affecting your investments? In this piece, we’ll briefly discuss some of the latest current events and how they may affect your investments.
The Russia/Ukraine Effect
The conflict between Russia and Ukraine has caused a variety of energy and economic disruptions. The European economy is expected to slow down, largely due to energy supply issues that resulted from the sanctions against Russia, and this may negatively impact those of us here in the US. This could possibly send the stocks of the companies that are based in or do large amounts of business in this area to plunge. Also, the conflict in Ukraine is exacerbating supply chain issues, which have already been frayed by the pandemic.
Inflation, Interest Rates, and Other Potential Factors
One of the biggest issues resulting from the supply chain issues is high rates of inflation. Inflation is the highest it's been in 40 years and the Fed recently increased short-term interest rates for the first time since 2018 by a quarter of a percentage point. It stated that there will be a hike at each of the remaining central bank meetings this year, which will take short-term interest rates to 1.9% by the year’s end. Many investors have been cheered by the Fed's aggressive move to combat inflation, but even Fed officials acknowledge that higher rates could slow economic growth this year. While Covid is moving away from the front page, the markets have a lingering worry that another variant could emerge and of course, the midterm elections will begin making headlines soon, as candidates take positions.
S&P 500 Correction
Add it all up, and you see the S&P 500 teetering on correction territory as some investors ponder the best way to ride out the next few months. We understand that current events can be a bit overwhelming, and you may feel the need to be proactive. But remember, we created your financial strategy based on your goals, time horizon, and risk tolerance, and we anticipated there would be unsettling events along the way. If you’re worried about the financial markets, please reach out.
*This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite.*