How will the war in Ukraine affect your stocks and 401(k)s? Experts offer advice

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A woman walks in front of Moscow’s International Business Centre complex this month. Russian President Vladimir Putin’s invasion of Ukraine has thrown the global economy into tumult. (AFP via Getty Images / TNS)

Russia’s invasion of Ukraine has roiled the global economy and panicked investors, prompting market experts to reconsider their financial philosophies.

Decades of relative harmony among the world’s largest nations fostered an international trading ground, but Russia’s attack on Ukraine has disrupted that unity, instigating what some fear could be “the Cold War 2.0.”

“Down the road, that’s the future that I envision,” Peter Berezin, a strategist at BCA Research, an investment advisory firm based in Montreal, told The New York Times. “We are going to be moving to a world where the world is less globalized. And globalism is deflationary. So we are at an inflection point for bond yields and inflation, and going to move into inflationary environments.”

That doesn’t mean investors should abandon their immediate strategies. Upending one’s portfolio in response to a war can be treacherous, advisers say.

“Don’t pull your money out. Don’t stop investing,” Jeremy Schneider, a finance expert at Personal Finance Club, told Time magazine. “Any reaction you have to the situation is more likely to hurt you than help you.”

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But a fragmenting market might compel investors to revise their future approaches to wealth management.

Consumer inflation jumped 7.9% over the past year, according to a March 10 report from the U.S. Labor Department. The increase reflects 12 months ending in February — before oil and gas prices surged — and still marks the sharpest spike in 40 years.

Christian Lundblad, a distinguished professor of finance at the University of North Carolina at Chapel Hill, expects such numbers will persist, introducing a complex investment environment.

“If this is creating a kind of new world order,” Lundblad told The News & Observer, “perhaps where there is more fragmentation of the kind of globalization that we’ve seen since the end of the Cold War, that means the arguments for how we want to structure a well-diversified portfolio just get more complicated.”

Investors have been cushioned from intense inflationary pressures for decades. Not since the early 1980s have inflation figures resembled today’s.

“Basically every American has enjoyed a low-inflation environment for a really long time,” Lundblad said. “Your typical 401(k) investor — there’s a generation or two generations of people who never had to think about this. You want to think about your savings and retirement allocation in a world where inflation is more on the table.”

Institutional investors — such as investment banks, mutual funds and universities — are already adjusting their portfolios to erect a hedge against inflation. The industry bet is to allocate more money toward “real assets,” according to Lundblad, “which are assets that have some inherent value and are maybe somewhat more protected or maybe even get some tail wind during an inflation environment.”

“So that’s a little bit new,” Lundblad said. “And then that plus an appreciation for what inflation history looks like together suggests we’re going to have to be rethinking a bit where we want to go.”

More about Russia’s war on Ukraine

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