The current Russian invasion of Ukraine will create a great deal of uncertainty and speculation. We can expect there to be ripple effects through the energy markets, investment markets, and possibly the European economy to a limited degree. At present, this remains a regional conflict whose global impact is likely to remain limited.
Regarding the energy markets, Russia is one of the leading producers of oil and natural gas worldwide. Therefore, the uncertainty surrounding oil supplies will cause the price of a barrel of oil to increase in the near term. In recent weeks, we know the U.S. has met with OPEC countries discussing potential steps to help alleviate upward pressure on oil prices in the case of a Russian invasion. Additionally, the U.S. has the capacity to produce significant amounts of oil and natural gas. If we decide to realize those capabilities, then it would likely stabilize the oil markets while also providing European countries with a dependable source of natural gas in the near term, if needed. There will be short-term shocks to the energy markets, but it is more likely those will subside in time.
Regarding the investment markets, we all know that uncertainty creates volatility in daily pricing of equities. It is no surprise that international equity markets declined shortly after the invasion of Ukraine or that U.S. equity markets are set to decline as well. While there is a possibility that higher energy prices could impact economic growth for the U.S. economy, we feel that impact will be limited. Additionally, the regional nature of this conflict has relatively little impact on U.S. companies and our domestic economy. Emotions and news headlines tend to drive daily movements in equity pricing, but corporate earnings are what drive long term performance.
Your investment portfolios are uniquely diversified as to your goals, desires, and risk comfort level. Our process remains unchanged. We will continue to monitor your allocations and individual money managers on an ongoing basis and make adjustments when we feel is appropriate and prudent. History has shown the best way to navigate periods of significant uncertainty is by adhering to your investment plan and maintaining a diversified portfolio. Keep in mind, while we have averaged nearly 1 stock market correction per year since 1928, before January, it had been over 22 months since the last correction. These periods of volatility can provide significant opportunities as well. We encourage you to contact us, at any time, if you feel there is a change to your risk comfort level.
Finally, we feel this is an appropriate time to take a step back and realize how fortunate we are to live in a country where we have the inherent rights to basic freedoms. Most importantly, possibly, is we have the right to speak our mind and even disagree. While this, at times, can become contentious, it is one of our underlying strengths. We have these rights now because of the tremendous sacrifices of those who came before us and those who serve now to preserve them. As Ukraine fights to protect its freedoms, we will continue to monitor the potential impacts on you and keep you apprised of any changes in our thoughts or decisions.
The Lesjak Planning Team