Letter To Clients: Geopolitical Events and Your Investments

Dear Client,

We work hard to advise our clients knowing that the financial markets are fraught with uncertainty.  As of this moment, that uncertainty has elevated a notch making it seem extremely high in relative terms.  Although the reality of the situation in Ukraine hit today, we have observed for some time now the indicators leading to this moment and have evaluated your investments with the possibility of armed conflict in mind.  Frankly, our core investment principles are founded upon the effort to control risk while remaining invested in an uncertain world.  Here are some facts as we understand them now.

Today, we awoke to the sobering news that last night Russia began the invasion of Ukraine.  Russian President Vladimir Putin’s intentions as we understand them today are to overturn the government in Kyiv and take down the country’s military.  The photos and videos emerging from the area remind us how precious life is and the importance of a stable, democratic government.  We can take some measure of comfort in the fact that much of the world is unified in its abhorrence of the acts of Putin and Russia.  We are watching this situation closely as it develops to see what the geopolitical ramifications will be.  We do not, nor really does anyone, know what is going to happen.

Prior to Russia’s invasion, the markets had entered correction territory, meaning aspects of the market have fallen greater than 10% since the peak. You have likely noticed over the recent past that we have been active in positioning your portfolios considering the current inflationary environment and the expected impact on interest rates.

Regarding the impact of Russia’s invasion of Ukraine on the markets, data that we have studied indicates that since the 1980s, downturns resulting from armed conflict are relatively minimal and the recovery is fairly quick.  However, we are all are no doubt hearing that this time is different.  Current unknowns in this situation are Putin’s larger intent, his support from China and the impact on Europe’s reliance on Russia for energy resources.  G-7 leaders have condemned Russia’s invasion and have stated, “We declare our unwavering support for and solidarity for Ukraine.”  They have imposed and continue to add to sanctions on Russia.  Again, we don’t know what will happen.

So, what does this mean to you as our client?  Our investment philosophy incorporates economic cycles like we are experiencing coming out of COVID and knowing that long-term investors will experience unknown events.  Your accounts are broadly diversified across industry sectors, underweight International Markets and, we believe, allocated in a way to weather the inflationary environment and the likely rising interest rates.  We will carefully monitor the events in Ukraine and factor in the geopolitical implications.  As we always do, we will make changes to your portfolio when we believe it necessary.

Please do not hesitate to call us with any questions or if your situation has changed.  We are here for you and appreciate the trust you put in us.

Sent to Clients: 2/24/2022

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