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February 2022 Update: Thoughts on The US Stock Market, Perspective on Russia/Ukraine War


Yes, it has a been a challenging month with volatile weather, COVID-19 continuing, a US stock market correction and now a war in Eastern Europe. I thought I would pass along a few things that may be of interest to you.

  • Current Views of the US Stock Market- Last week I presented to the American Association of Individual Investors’ Greensboro, North Carolina chapter. The presentation provides updated data on COVID-19, the economy, and stock market pro and cons. The punchline is stocks remain attractive versus bonds, elevated versus history and we foresee mid single digit annual returns over the next 3-5 years. A copy of the presentation is attached.

  • Putting the Russia/Ukraine war in proper context– The S&P has now entered correction territory (down 10%+) while the NASDAQ is on the cusp of a bear market (down 20%+). Naturally, some investors are asking what should I do?

    • My overarching advice would be to employ the UK World War II adage: Keep Calm and Carry On. While the war is unsettling, upsetting, and unfortunate, we need to keep perspective on how it may impact your finances. The war should not cause most individuals to rebalance their investment allocations, sell stocks, etc.. Instead, the event underscores the importance of:

      • recognizing your ability to sleep at night (risk tolerance) with your investment allocation when turmoil like this occurs

      • having a financial plan designed to address good and bad events that may occur

      • having an investment allocation aligned with your financial planning horizon

      • staying invested in a way that aligns with your financial plan

    • Analyzing the impact of war, here are some relevant economic facts to consider:

      • Per the Economist, Russia’s share of global production is:

        • 43% palladium (used in auto catalytic converters)

        • 16.6% natural gas

        • 12.1% oil

        • 11% nickel

        • 11% wheat (FYI, Ukraine’s is about 9%)

        • 5.6% aluminum

      • The war should result in higher inflation that is mainly felt in the form of higher commodity prices but also in elongated supply chain issues.

        • Some economists are expecting global inflation to pick up about 1% in 2022 as the result of the war.

      • The war should result in slower economic growth globally and particularly in Europe.

        • Some economists are expecting global economic growth to be hurt by 1% and Europe GDP growth to be hurt by 1.7% due to the conflict.

      • Central banks may or may not accelerate rate hikes due to rising inflation pressures and/or war related economic damage.

        • More rapid rate hikes are more likely to occur in the US due to higher inflation pressures and less economic damage compared to other parts of the world. Rate hikes in Europe may be delayed to additional economic damage.

    • LIKELY OUTCOME: The above analysis most likely implies that the war should have a limited impact on the global economy and thus have a limited impact on the stock market. 

      • If this is the case, we should expect a temporary downdraft and then recovery in the US stock market.

      • As of this note (post close 2/24 the first day after Russia invaded Ukraine), the S&P increased 1.5% today and is down 1.4% over the last 5 market sessions as investors braced for war.

      • To provide a point of reference, the S&P declined 1.2% on average the day of major geopolitical events since 1941 and 5% on average in total. The downdraft period lasted 22 days on average and recovery lasted 47 days.

        • Please see US stock market resiliency chart attached.

    • UNLIKELY OUTCOME: The war causes a stock bear market as inflation rages on much greater than expected, economic growth lags and/or central banks engage in policy mistakes. Slide 50 of the current views on the US stock market presentation sums it up well. 

      • Since 1929 the causes of bear markets have been:

        • Recessions - 77% of the time

        • Extreme Valuation - 54% of the time

        • Aggressive Fed Actions - 46% of the time

        • Commodity Price Spikes - 31% of the time

      • In reviewing conditions today:

        • The war will likely serve as a minor dent on the global economy. Note, the NY Fed recently predicted the odds of a recession using the treasury model at 6%. This is shown on slide 51 of the US stock market deck.

        • The stock market valuation is above average not excessive.

        • The Fed should have leeway to raise rates given historically low levels.

        • Commodity price spikes appear the most worthy to watch.

      • Even if a bear market occurs, please keep your investment horizon in mind. Riding the volatility and staying invested makes sense for most individuals with a long-term time horizon.

        • Since 1929 the average bear market decline is 42% and average duration is 22 months. The average bull market generates a 166% return and lasts 54 months.

  • If you have questions on investing and/or financial planning, please don’t hesitate to reach out. To schedule a time to speak just click on the link:

  • If you would like to unsubscribe from our research just email us back and we will denote it.

Stay warm and safe,


William E. Hawes, CFA, CFP®

President and Chief Investment Officer

Candor Asset Advisors


512 522-8501


Investment advisory and financial planning services offered through Candor Asset Advisors, LLC, a registered investment adviser. Links to third-party web sites are provided for informational/marketing purposes only. Candor Asset Advisors does not endorse or support the contents or opinions of third-party links. Candor Asset Advisors is not responsible for the content, privacy and security of a third-party website. All investing involves risk. Past performance is not a guarantee or predictor of future performance. Financial plans are hypothetical in nature and intended to help you in making decisions on your financial future based on information that you have provided and reviewed.

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