The Russian Invasion of Ukraine has caused a significant increase in uncertainty and volatility in the markets. For those of you positioned more heavily in equities, you’ve likely seen volatility in your 401(k) account that is similar to what we saw in the height of the COVID-19 crisis in 2020. Due to these rapid changes, the 401K team at Sequoia has seen an increase in inquiries asking what to do about investment allocations. “Why is my account going down?” or “Should I change my investments?” are now common questions. As you evaluate your holdings and what actions you may consider, here are a few things to keep in mind.
Why do stocks go down when there are significant global events like the Russia Invasion of Ukraine?
Generally, when there are more sellers than buyers, stock values go down. Uncertainty, especially in the global economy can have an immense influence that traditionally causes investors to sell. What is hard to predict is how long investors will continue selling, driving stock prices down, and when a bottom will be reached. Trying to time these events can be very tricky. Negative news typically drives prices lower. The challenge for the investor is not knowing when negative or positive news will be released. Additionally, investors seek to anticipate reversals and invest ahead of a trend.
Should I change my investments?
For those attempting to “time” the market and anticipate its direction, be careful. Big moves may often happen during after-market hours, on weekends, or when you are not expecting a turnaround.
For those considering not making any changes, there is historical precedence for market corrections occurring and the market rebounding.
There is significant uncertainty about what will happen next, and the markets may continue to be volatile. Until then, evaluate your long-term goals and strategy before making any short-term changes.
For some additional perspective, please view this short Market Bulletin Update from our broker/dealer, Pensionmark.