The Market’s Response to War and Uncertainty

It’s been almost two weeks since Russian troops entered Ukraine. We too watch in horror as the toll on Ukrainian civilians continues to grow. In addition to the lives lost and infrastructure destroyed, we are witnessing the fastest growing refugee crisis in Europe since World War II, according to the United Nations.

“Any man’s death diminishes me, because I am involved in mankind, and therefore never send to know for whom the bell tolls; it tolls for thee.” – John Donne

The Market’s Response

AAF Wealth Management, a division of AAFCPAs, provides some context below to help you quantify how these events may impact your current and future financial plans.

The Impact of Sanctions

Significant sanctions posed on Russia from the world community are designed to force Putin to cease further military actions and negotiate an end to the conflict. Countries and corporations alike have implemented changes in their relationships with Russian organizations and citizens.

Some notable sanctions, from an economic standpoint, include:

  • Investment Index companies such as MSCI have removed Russia from various global indices that they oversee, effectively eliminating almost all capital inflows to the Moscow Inter
  • bank Currency Exchange (MOEX).
  • NATO Countries have implemented sanctions, including removing Russia’s ability to transact financially with the rest of world via the SWIFT payment system. SWIFT serves as the primary mechanism by which countries send secure financial messages to one another to execute financial transactions.
  • A number of countries around the world refuse to buy Russian exports, e.g., oil, gas, industrial metals. This may have a tremendous impact on Russia’s economic stability.

Prior to the invasion of Ukraine, Russia’s economy was valued at $1.4 trillion. Estimates on the percentage of revenue that oil and gas made up of this figure were as high as 60%. (Note: These estimates were calculated prior to oil’s parabolic rise north of $130.00 a barrel over this past weekend, and the increase in European Natural Gas prices from 70 Euros per megawatt hour at the beginning of January to more the 265 Euros as of March 7th.) With traders, shippers, and insurance companies have ceased in the transportation and delivery of Russian oil, 4 million barrels of oil per day are no longer sustaining the Russian economy.

At home, the US stock market is also reacting to the conflict. This past week, the Federal Reserve chairman Jerome Powell said “the uncertainty caused by the military conflict will impact inflation and lead to greater market instability.” The Federal Open Market Committee (FOMC) will meet next week to determine what changes they intend to make about interest rates and the on-going bond buying program known as “Quantitative Easing.” The effects of Russia’s war on Ukraine will certainly loom large in their decision-making process.

At AAF Wealth Management, our goal is to build an “all weather” portfolio, and we do not believe that long term plans are well served by market timing. Our financial plans are designed and stress tested using a Monte Carlo simulation in which we analyze 1,000 possible market outcomes to determine the highest probability of success. These simulations account for worst case scenario market shocks.

Historically, the market generally recovers from the impact of military events over the long run (see chart below).

Market Event


S&P Loss

Days to recover

Iraq Invasion of Kuwait 1990 -16.9% 189
911 Terrorist Attacks 2001 -11.6% 31
Cuban Missile Crisis 1962 -6.2% 18
North Korea Invades the South 1950 -12.9% 82


If philanthropy is on your mind in response to war, there are a number of charities actively addressing humanitarian needs. Contact your AAFCPAs Tax Partner to discuss the best approach to transferring wealth as it relates to taxability.

As always, we believe a disciplined approach to portfolio construction is key to managing investor risks related to the current market uncertainty. No one knows what the market is going to do for sure. We remain prepared to act as appropriate.

If you have any questions about your personal financial plan, please contact: Carmen Grinkis, PhD, CLTC, CFP® at 774.512.4061, cgrinkis@nullwealth.aafcpa.comAndrew E. Hammond, CFP® at 774.512.4143,; or your AAFCPAs Wealth Advisor.