Market swing brings more questions than answers

There are more questions than answers today. And while what happened in the markets following Russia’s invasion of Ukraine is undoubtedly not the most important story, it reflects real concerns for many.

State of play: Call volumes are up at Charles Schwab, chief investment strategist Liz Ann Sonders says, but the questions haven’t been all that different from those posed during other times of uncertainty. 

• Do I need to be doing something differently with my money? How long will this conflict impact markets? Will the Fed change its approach to raising interest rates this year? How much will gas prices go up? 

The answer to all is an unsatisfying one: It depends. 

• “There’s no blanket, singular answer that’s appropriate for every investor,” Sonders says, in terms of strategy.
• At the same time, panic should never be a strategy, whether it’s both buying or selling, she adds.

How long the conflict could impact markets is also not easily answered, and certainly not as simple as suggested by historical charts making the rounds today showing market performance after other major geopolitical events, Sonders says. 

• While there’s nothing invalid about showing past performance, using that as a definitive conclusion ignores more dire warnings. 
• “Those that are suggesting this is a nothing burger … what news are you watching?” 

The big picture: Markets started to weaken a year ago, longer than a lot of people think. 

• “We've been sort of in a stealth bear market,” she said. “It’s just that last year, most of the weakness was concentrated in [smaller stocks].” 
• Geopolitical tensions have also been roiling markets already this year, exacerbating the churn from last year.

What to watch: The Fed will likely raise rates as expected in March but the likelihood that the bump will be 50 basis points may now be lower due to the Russia-Ukraine conflict.

• "The Fed's job is not to step in every time there's financial market volatility, unless it threatens financial system stability," she said.
• As for gas prices, expect more volatility with one silver lining — the weather is warming. 

Hope’s thought bubble: The world is just barely emerging from the depths of the pandemic and is now faced with another potential existential crisis. Human resiliency will once again be tested. 

The bottom line: “It's not what we know that matters in terms of being successful over the long term. And as an investor, it's what we do along the way,” says Sonders.