Let me preface this column by saying that I believe war is a terribly stupid thing. It is unbelievable that in 2022, we still have leaders who think that large-scale violence is the solution for their personal insecurities. The human cost of Russia’s invasion of Ukraine is immeasurable in any currency. But since this column is about money and finance, we’re going to look at what this war means for you financially.
The most immediate and obvious impact is on oil prices. A supply shortage coming out of the pandemic is only going to be made worse by this war. A slew of financial sanctions imposed on Russia by many countries have made it hard for Russian oil companies to sell their products. There are now international discussions on imposing an embargo on Russian oil exports. In any case, not many countries and companies want to be seen doing business with Russia. As Russia is the third-largest oil exporter in the world, you can imagine what taking their supply off the market is going to do to prices.
This means that everything—from prices at the pump to groceries and everything in between—is going to get more expensive for us. For all our efforts at turning to sustainable green energy sources, oil is still the grease that keeps the economic machine running. This also means that central banks’ anticipated interest-rate increases are going to be ineffective at curbing inflation. Increasing interest rates helps if inflation is caused by demand running too hot. However, what we have here is a supply problem and there’s nothing central bankers can do about this.
Other than using transit more and driving less, there’s very little we can do as consumers. Perhaps you can look to cut back even more on discretionary spending, such as dining out at restaurants, or look to take on more shifts at work. But the hard truth is, we can only grit our teeth and hope that Putin comes to his senses soon.
On the investment front, stock markets have taken an absolute thrashing since the US started warning of imminent Russian aggression.
The way I see it, there are two ways this war will go. First, the fighting ends and, in time, markets and economies recover and stock prices resume their long-term trend upwards. In this case, continuing to invest regularly for the long-term will still pay off despite the short-term pain of seeing red in your portfolio.
The second way this war ends is with Putin losing his mind and bringing upon nuclear Armageddon. In that case, money is probably the last thing we have to worry about. So stick to your plan and keep investing.