“Any time you have a down market regardless of the reason you will have clients call and this is where financial advisors can shine by giving perspective,” says Laila Pence, a Forbes Top Advisor from Newport Beach, California who manages $2.2 billion for wealthy clients. “Right now fear is outweighing greed and investors haven’t seen a down market in a long time.”

Pence came to the United States from Egypt when her family was displaced during the six-day war in 1967. This shared experience has her feeling sorry for the Ukrainian people as she tells her clients that these geopolitical situations usually cause only short term pullbacks.

Pence cites Vanguard research showing that geopolitical sell offs are usually short lived with average total return six months after the event being 5% and a year later, 9%. She is also reassured by statements from President Biden and other western leaders as reassurance that this instability will not escalate past Ukraine.

“It’s just a matter of time, one way or the other, before it won’t be on the news on a day to day basis and that’s really what the market wants,” Pence says. “It’s all about uncertainty, the market hates uncertainty.”

Prior to Russian President Vladimir Putin’s invasion of Ukraine, investors had already been treated to a rocky start to 2022 for markets, with the S&P 500 dropping 10.59% in 2022 largely on the back of inflationary concerns and anticipation that the Federal Reserve will raise interest rates numerous times this year.

Now with a geopolitical conflict added to the equation, financial advisors are busy reassuring clients that these events usually have short term implications and that markets are mostly spooked by the uncertainty and will stabilize once there is a resolution.

The major wirehouses have sent out communications to clients, looking to quell concerns. In a note to investors, UBS Global Wealth Management Chief Investment Officer Mark Haefele said that “heightened volatility on the escalation of the conflict shows markets had not fully priced in the likelihood of deeper conflict,” adding that volatility in the near term as nations and leaders react should be expected with energy prices possibly headed higher, with acute disruption in oil-reliant economies. 

However, Haefele says these events have not historically prohibited equities from moving higher in the medium term. Extolling the virtues of diversity, he added that “drawdowns driven by geopolitical stress events are typically short-lived for well-diversified portfolios. Historically, the greatest risk for investors from geopolitical crises has come from overreacting and under-diversifying.”

David Bahnsen, another Forbes Top Advisor from Newport Beach, California has reached out to clients with daily investment summaries in order to preempt panicked calls. His portfolios are overweight energy and manage around dividend growth, so his clients are close to even despite the broader market losses this year.

“The cause of this volatility is uncertainty so any outcome good or bad ends that,” Bahnsen says. “The tail risk is some sort of resurgence of the Cold War, which is not likely to happen. But if that were the case, then I don’t think that the market would shrug it off.”

All three major indexes were up on the day in the wake of the invasion with the Dow up more than 0.28%, the Nasdaq up 3.34% and the S&P 500 up 1.5%, a surprising outcome that Pence attributes to investors hoping that this turmoil will lead to less frequent and smaller interest rate hikes in 2022. For Jeff Grinspoon, a Forbes Top Advisor with Hightower-affiliated VWG Wealth Management in Vienna, Virginia, the positive day on Wall Street is a product of the old adage that you sell on the rumors and buy on the news after rampant speculation of an impending invasion for weeks.

Grinspoon sees muted fallout from the conflict because of Ukraine’s limited impact on the global economy and Russia’s similarly limited economic interests with the exception of energy. He foresees the bigger threat being the potential that this military action emboldens China to invade Taiwan, embroiling two far more integral economic powers in a similar situation.

“Most people have been through any number of various geopolitical issues over the years and know how these things play out,” Bahnsen says. “You get enhanced volatility and some severe down days, some recovery rallies and you can’t time your way in and out of them. Then things sort of normalize and markets go back to caring about what markets always care about which are earnings and liquidity.”

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