A War and the Financial Markets

Dear Clients and Friends of ZWM,

I started to write this email several times in the last 2 weeks. As soon as I updated my references to specific market movements, things would break the other way. So, while the trend in the markets is down over the last 2 weeks, and maybe not just because of the war, I will attempt to nail it down this time. 

Once again, we are involved in a geo-political crisis that will impact our economy in some unknowable-for-certain ways in the future and therefore impact our markets. The good news: over the last 2 weeks, while the markets are down, they are kicking and fighting, with many days showing gains (like as of noon today). What a wild 2 weeks: oil surged to well over $100 per barrel, then fell back significantly, and now is trading around $95; gasoline futures were up, then down, now up and just below recent highs…which led to significantly higher at-the-pump prices for all of us; Gold, after its long and mighty rally, fell back and is below $5,000 per ounce today, which has many scratching their heads…have we seen the peak already?

The VIX index is a fear indicator for the financial markets wherein a higher price shows lot of fear in the markets and lower VIX prices mean less fear. The Vix traded over $30 last week, up nearly 80% from under $17 before the war. Right now, it is trading at about $24.50, still reflecting lots of fear.

Unfortunately, we still do not have a crystal ball! And nobody can predict for certain what happens next in the Middle-East warzones, or the US and foreign investment markets.

So, what do we do? The good news is that we started to play defense some time ago. Our positions in the highest-quality bonds, and our bias toward high-quality stocks have served us well, and we believe will continue to help us do so through whatever the next several months might bring.

So, to oversimplify, it is time to take a deep breath and be prepared to do nothing!

As always, please feel free to contact any of us at ZWM about any concerns that you have about how the markets may affect your portfolio and our overall plan for you.

Thank you for your trust, Tom Zimmerman, and all of us at ZWM