War in Ukraine impacted stock markets

We watched the news with shock and horror as Vladimir Putin waged war on Ukraine, killing thousands of innocents and displacing millions more. The cost to the Ukrainian people is massive. We cannot express deep enough sympathies to them, their families and friends, and all the other victims of war. 

While it seems almost petty to even bring it up, Putin’s actions have also impacted stock markets around the globe and had an immediate and noticeable cost in our day-to-day lives, higher gas prices being one of the most obvious. Some are asking what effect the war is having on our investments. Sometimes events cause us to reconsider our investment strategies. Should this be one of those events?

Let’s start with the most successful investor of all time. Warren Buffett’s been silent about the current crisis so far (probably buying up stocks at a discount), but back in March of 2014 when Russia annexed Crimea, he stated that a Russian invasion of Ukraine at the time wouldn’t cause him to sell any stocks. In fact, he went on to say, “If stocks are cheaper, I’ll be more likely to be buying them.” He went further, adding that he wouldn’t even cash out if the conflict escalated into World War III.

“Well, if you tell me all of that is going to happen, I will still be buying the stock. You’re going to invest your money in something over time. The one thing you could be quite sure of is if we went into some very major war, the value of money would go down.”

More recently Buffett reiterated his faith in our long-term prospects. During Berkshire Hathaway’s 2020 AGM he stated, “I was convinced of this in World War II. I was convinced of it during the Cuban Missile Crisis, 9/11, the financial crisis — that nothing can basically stop America. We faced tougher problems, and the American miracle, the American magic, has always prevailed, and it will do so again.” He did acknowledge that the American Civil War, the Great Depression, and the COVID-19 pandemic were all detractors from US progress, but he states (rightfully so, in my opinion) that the country does, and will, always come out ahead.

It should be noted that while Buffett says this about America, it holds true for us here in Canada and, I would argue, all free-market democratized nations. 

If we look at things from a historical perspective, after a major world event (eg. Pearl Harbour, Cuban missile crisis, Brexit, etc.), most of the time stocks recover within a year. Sometimes they take longer, but they have ALWAYS recovered. And I would claim they always will recover. Volatility is and will be a constant. It’s reasonable to expect that enhanced returns will continue as well.

Finally, we look to what the expected long-term impact of the invasion will be, and here we find a silver lining. We know this is creating a sense of unity among NATO nations. We know this is creating a greater sense of urgency in other nations to join. 

NATO’s stated primary purpose is “to guarantee the freedom and security of its members through political and military means”. 

POLITICALY: NATO promotes democratic values and enables members to consult and cooperate on defence and security-related issues to solve problems, build trust and, in the long run, prevent conflict.

MILITARILY: NATO is committed to the peaceful resolution of disputes. If diplomatic efforts fail, it has the military power to undertake crisis-management operations.

Having more members commit and invest for freedom and security in the world is a very positive thing. Will this prevent wars? I doubt it will eliminate all future threats, but I’m sure it will prevent some.

Long term, Putin’s gambit has backfired. While we don’t yet know the outcome of his war with Ukraine, we do know that he has succeeded in uniting the democratic world against him in the short term and against future tyrants in the long term. An outcome that, while coming at an astronomical cost for the people of Ukraine, can only be a huge positive for the globe in the future.

So, this might be a good time to trigger a review of your portfolio. Is it still an appropriate long-term portfolio for you? If yes, don’t change it. But if not, review it, figure out where it should be, and work with your advisor to get it there. Not in a knee-jerk reactive kind of way, but in a metered, well-thought out, mindful, and planned way.

This war is a travesty, and the points above are not meant to trivialize the tragedy one iota. Please pray, act, and donate whatever you can to help. There are many great charities helping Ukraine right now. If you aren’t sure where to donate, please join me in donating to the World Vision Ukraine Crisis Response. You can either Google it or click here if you are reading this online: https://donate.worldvision.ca/products/ukraine-crisis-response. 

Whatever you do, remember Peter’s words and try not to be anxious. Look at the big picture. God’s got this.

Arnold Machel, CFP® lives, works, and worships in the White Rock/South Surrey area. He is a Certified Financial Planner with IPC Investment Corporation and Visionvest Financial Planning & Services. Questions and comments can be directed to him at dr.rrsp@visionvest.ca or through his website at www.visionvest.ca. Please note that all comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary are those of Arnold Machel and may not necessarily reflect those of IPC Investment Corporation. While every attempt is made to ensure accuracy, facts and figures are not guaranteed.  

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