RGT Wealth Advisors
Client Login
Menu
  • Our team
  • Our focus
  • Our approach
  • Our latest
  • Client Login
  • Our Team

    We’re always strategic and we think outside the lines to bring our clients fresh ideas.

  • Our Focus

    RGT manages your finances so they don’t manage you. And that equates to complete peace of mind.

  • Our Approach

    We’re an independent, fee-only firm that provides investment advice – always in our clients’ best interests.

  • Our Latest

    Did you know? RGT is always active and engaged, whether we’re making the news or sharing it.

Prev post
Mar
14
Update: Russian Invasion of Ukraine Adds to Current Market Turmoil

by: Greg Bone, MA, CFA, Managing Director

We are now in the middle of the third week of the war in Ukraine, following Russia’s invasion on February 24th. Both the ultimate outcome, and the path to get to that outcome, are still very much in doubt. In investment terms, the war is a prime example of an exogenous shock – events that occur that have no direct connection to investment markets yet have profound implications for investors.

 

The economic implications of the war have exacerbated already strained economic conditions around the globe.

 

The latest inflation numbers released by the Bureau of Labor Statistics showed February inflation running at 7.9%, which is the highest inflation reading since January of 1982 when it was 8.4%. Gasoline, groceries, transportation, and apparel were key components that pushed inflation up in February. Average gasoline prices are now well over $4 per gallon in the U.S. for the first time since 2008. While some may have expected inflationary pressures to ease later in the year prior to Russia’s invasion of Ukraine, the war may ratchet up these pressures by adding problems to supply chains and increasing the cost of energy as sanctions against Russian oil and gas production take full effect. The ongoing conflict may also increase the cost of food due to the loss of Ukrainian wheat production and higher fertilizer costs, as Russia and Belarus are the 2nd and 3rd largest producers of potash, an important component in fertilizer production.

 

Despite the war, the Federal Reserve is expected to raise rates by 25 basis points later this week in response to elevated and persistent levels of inflation. Given the high levels of inflation, the Fed will likely be hard-pressed not to continue with a program of gradually increasing rates throughout the year even if economic growth begins to slow due to energy supply shortages, supply chain problems, and rising interest rates.

 

The combination of high inflation and low economic growth is known as stagflation and has not been experienced in the U.S. since the late 1970s into the early 1980s, however, there are some key differences between today’s economic environment and the environment during our last bout of stagflation. In the 1970s and early 1980s, in addition to low levels of economic growth and high levels of inflation, the U.S. economy was hampered by high levels of unemployment. The unemployment rate in the U.S. averaged 7.5% between 1974 and 1983, peaking at 10.8% in November and December of 1982. Today we have the opposite problem in the labor market – a shortage of workers. The most recent unemployment number in February came in at 3.8%. Another positive factor today is that there seems to be very little stress in the U.S. banking system. Regulations put in place following the 2008 financial crisis have limited risk-taking by banks and have forced banks to shore up their balance sheets. And finally, potential corporate distress seems to be contained, at least for now, to sectors that were most affected by COVID and may not have fully recovered yet. These positive factors seem to imply that the economy is positioned to recover should stresses begin to ease.

 

In today’s environment, one certainty is that there are more surprises in store for us and that the road forward will be neither straight nor smooth. And that means that we should continue to stick to the fundamentals. A few possible examples are listed below:

 

  • Be flexible and balanced in your investment approach.
  • Avoid short-term thinking and investment strategies with binary outcomes.
  • Seek quality.
  • Avoid recency bias – models tied too much to the recent past may be flawed as the world is changing.

 

Practically, what measures should we consider?

 

  • Diversify your portfolio. This could be as simple as making sure you are exposed to both value and growth stocks. Thus far this year value stocks (Russell 1000 Value) are down -5.56%, but growth stocks (Russell 1000 Growth) are down -17.89%.
  • More broadly, diversification includes such things as floating rate bonds, gold, and absolute return strategies.
  • Take advantage of tax-loss selling strategies and opportunities to rebalance when they make sense.
  • Understand the risk you are taking today. In a world of falling interest rates, re-investment risk is real, and investors may find themselves putting new cash to work at lower yields. In a rising rate world re-investment “risk” isn’t risk, but it can be an opportunity to put cash to work at higher yields. In this new world of rising rates managing duration risk and cash flows creates opportunities for future higher returns.
  • Generally, all investment decisions should be done within the context of a long-term, personalized investment plan. There is no one-size-fits-all solution. Your investment decisions should be made within the context of your financial goals and objectives.

 

At RGT we know that times like these can be unnerving, but we come to work every day to provide our clients with the highest level of service, performance, and integrity. We value our relationships with clients and are humbled by the trust you have placed in us. You should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from RGT. If you have any questions or concerns, please contact your RGT advisor.

Archive

  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • June 2021
  • April 2021
  • March 2021
  • December 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • October 2019
  • September 2019
  • August 2019
  • June 2019
  • April 2019
  • February 2019
  • January 2019
  • October 2018
  • July 2018
  • April 2018
  • January 2018
  • October 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • July 2016
  • April 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • August 2015
  • July 2015
Prev post

The first step on the path to getting where you want to go starts with an honest conversation. And once we determine the right direction together, we’ll help you stay the course.

Let’s Talk
  • Contact Us
    214-360-7000
Submit request onlineCancel
Fields marked with an * are required
  • Cancel * Required field
    5950 Sherry Lane, Suite 600
    Dallas, Texas 75225
    214-360-7000
    ©2022 RGT. All Rights Reserved.
    • Terms of Use
    • Website Privacy Policy

    • RGT Brochure (ADV Part 2A)
    • RGT Relationship Summary (Form CRS)

    • Careers
    • Client Access