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Will the conflict in Ukraine lead to a market meltdown?

Rest assured that we are closely monitoring the situation for you and that our priority is the development and protection of your assets.


Did you know?

If you had invested $100,000 in the U.S. stock market on January 1, 1960, your investment would be worth $49,669,300 on December 31, 2021. * If you had kept your investments!


Here's a list of 10 events that could have caused you to panic and exit the market.

  1. 1962: the Cuban missile crisis

  2. 1969: shortage of capital, fall of the markets

  3. 1970: intensification of the war in Vietnam

  4. 1979: oil prices soar

  5. 1980: interest rates at a record high

  6. 1982: worst recession in 40 years

  7. 1990: Persian Gulf crisis

  8. 2001: 9/11 terrorist attack

  9. 2008: Global financial crisis

  10. 2020: COVID-19 pandemic


Key points to remember

  • The conflict between Russia and Ukraine may contribute to increased market volatility in the short term.

  • The disruption of Russian energy exports due to the conflict may temporarily contribute to higher global energy prices.

Let's put things in context!

History teaches us that while geopolitical conflicts such as the current one between Russia and Ukraine can temporarily destabilize markets, they usually do not have negative long-term impacts for investors.


As Dirk Hofschire of Fidelity's Asset Allocation Research team says, Russia's overall economy ranks 11th in the world. It is only 1/20 of the U.S. and 1/15 of China. As a result, this crisis is not expected to have a lasting and significant impact on the global economy and financial markets.


The only downside is the importance of Russia as an energy producer. It produces 10% of the world's energy and 50% of the energy consumed in Europe. This fact could lead to a significant increase in energy prices and affect the volatility of financial markets in the short term.


The short term

This will depend on the extent of the sanctions imposed on Russia by the United States and Europe. Russia, for its part, could cut off all its energy exports to Europe.


Economic impacts

Western Europe and especially Germany do not have access to an easy alternative energy source to replace Russian natural gas. This could affect their economic growth.


The United States, rich in oil and natural gas, will not see its economy particularly impacted by the conflict. However, there could be a surge in inflation due to the increase in the price of oil products.


Impacts on the markets

According to Hofschire, "Russian military action would likely add to overall market nervousness. Current financial market volatility reflects a variety of investor concerns, so another source of uncertainty and disruption would not be helpful." He then adds that additional inflationary pressure and increased market volatility should not cause a recession in the United States.


Conclusion

The uncertainty that Russia's invasion of Ukraine could cause is likely to cause a short-term decline in the markets. But in the long term, there should be no negative impact for you, the investor. On the contrary, the situation could create excellent opportunities to invest in a bear market.


Remember, you are invested for the long term.


If you have any questions or are concerned about the situation, contact me immediately.







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