One of the more enjoyable parts of my job is answering questions clients have about their portfolios. Given the continuing Russia/Ukraine war, I’ve been asked multiple times about how a Russian nuclear attack could affect the world markets and destroy the world economy. Though clients have phrased the question more delicately, not wanting to sound like they’re only interested in money when so many lives are at stake, they ultimately want guidance about handling their investments in rocky times.
Historical lessons
Although I constantly say “past performance is no guarantee of future returns,” folks nonetheless want to frame the current situation in relation to bygone days. Fortunately, the world has very little experience with nuclear wars that destroy the world economy. The only time nuclear bombs were used was when the Americans dropped two bombs on Japan which led to a speedy end to the war. By 1950, the stock market started going up and remained strong for years. What can we learn from this? Basically nothing.
A catastrophe is just that… catastrophic
Whether the Russians use weapons of mass destruction or continue wreaking havoc with conventional arms, they are causing a huge global upheaval. The supply chain for food, fuel, and other critical commodities is unpredictable, causing uncertainty in everything from computers to cars, metals to medicines, and from travel to technology. If the aggressors up their game, adding nuclear weapons to the mix, they may feel further emboldened, which wouldn’t bode well for global economic stability.
A better idea than predicting the future
On the other hand, maybe the Russians don’t want to join the club of “countries that have used nukes,” and perhaps, like all crises and wars, this nightmare will end, too. At that point, what will happen to the economy? Optimists may find a brighter future. But for those who can’t stand the shake-up, or who believe in a gloomier picture than I described, perhaps it’s time to make their portfolios safer, less exposed to the stock market.
Not sure whether your portfolio makes sense in senseless times? Let’s start a conversation about your U.S. investment accounts (Send an email to: doug@profile-financial.com).
Douglas Goldstein, CFP®, GFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published October 19, 2022.