It’s been two weeks since the Russian invasion of Ukraine begun, and since then the world has faced rising oil prices and political unrest. This has led to increased volatility and uncertainty for stock investors. However, finance experts recommend keeping calm.
It was in the early morning of February 24th that Ukrainians first awoke to the sound of bombs, signaling the start of the Russian invasion. Since then, several peace talks have been facilitated and failed. As a result, stocks have dropped rapidly, and gas prices almost doubled overnight. However, experts warn that the worst thing investors could do is panic.
Remaining calm key to stock investors
Sam Stovall, who is the chief investment strategist at CFRA Research, says that the stock market effects of the conflict are reminders of the volatility that global events can cause. As such, Stovall along with many financial experts recommend keeping a cool head as the effects of the conflict play out. Facing situations such as these are a way to test your investment strategies, rather than throwing caution to the wind.
In other words, rather than seeing the fast drop in the stock market as a reason to pull out, it should be seen as an opportunity to do two things. First, review one’s investing strategies in accordance with global events, especially as it correlates to your risk tolerance. Second, consider buying more stocks as the prices are now low.
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Historical evidence of stock recovery
Another reason why experts are recommending the ‘don’t panic’ technique is because of historical evidence that the stock often recovers after major international turmoil. Lindsey Bell, who is the chief markets and money strategist for Ally Invest, states that the stock usually goes through a tough initial phase following conflicts but generally recovers after a couple of months.
Sam Stovall is even more optimistic, stating that whereas stocks tend to fall about 6 percent in the aftermath of a global catastrophe, such as a military or terrorist actions, the losses are often regained in less than a month. Often, the gains may eventually even be surpassed a year later. That is one of the reasons why Stovall has been quoted saying: “During times of elevated volatility and tension, don’t allow your emotions to become your portfolio’s worst enemy.”
Growing fear of recession
Many are worried about the possibility for a recession as agricultural commodities rise in price alongside the gas costs. David Rosenberg, who is a chief economist and strategist at Rosenberg Research, agrees that the timing of the stock market drop as “pandemic-induced bottleneck pressures were just showing signs of thaw” is a disturbing flow of events. However, Stovall reassures that seeing price increases in this situation are unlikely signs of recession and should rather be treated as stunting economic growth in the short term.
Thus, despite financial experts being divided on the long-term effects of the Russia-Ukraine crisis on the economy, the most popular advice remains to stay calm.