The Markets (as of market close February 25, 2022)
Stocks closed mostly higher last week, despite a tumultuous week with the Russian invasion of Ukraine. Of the major benchmark indexes, only the Dow and the Global Dow closed the week in the red. The Russell 2000, the Nasdaq, and the S&P 500 each posted solid gains. While the world reacted to the conflict in Eastern Europe, traders sought domestic stocks, driving values higher. Apparently, some investors may be viewing the Russia-Ukraine conflict as a reason to believe the Federal Reserve may not be quite so quick to jack up interest rates. However, with prices continuing to rise even before the turmoil in Europe, inflationary pressures are likely to accelerate due to disruptions caused by the war, which would seem to increase the likelihood of a more aggressive stance by the Fed. Much is still to be determined in the weeks ahead.
The Ukraine situation remains fluid, and we are monitoring it as things develop (as we have for the last several weeks). While we hope for a peaceful and swift resolution, the possibility of protracted conflict is real.
It should go without saying that the tragic human cost of this crisis is vastly more important than an individual’s account balance. This is an important perspective to maintain as we look at the impact on markets. With that in mind, let’s answer a few questions about the invasion of Ukraine.
How does this impact the Azzad portfolios?
Our portfolios have virtually no direct exposure to the crisis. However, equities more broadly have sold off in sympathy, even those with modest or very little connection to any goings-on in the region. It is likely they will see continued pressure in the short term as American and European allies weigh additional sanctions and actions.
And while the Russian invasion is most likely to hurt the country itself and their immediate neighbors, other countries may benefit. For example, other petroleum exporting nations have benefited from higher oil prices globally, potentially bolstering sukuk-issuing nations in the Gulf Cooperation Council.
The year 2022 has already begun to play out differently than the past couple years, including the extraordinary returns for stocks. The market has entered correction territory, which is defined as a drop of more than 10% from recent highs.
What should investors do?
However, it’s worth remembering that since the stock market hit bottom in March 2020, the S&P 500 rose 114.4 percent through Jan. 3. Compared to that run, the market’s decline since then seems fairly paltry.
With that in mind, we at Azzad try to inform our clients about the dangers of attempting to time markets and instead counsel a more intentional approach, specifically:
- Develop an investment strategy with your advisor based on your unique inflows, outflows, and required return and pay special attention to risk tolerance in this setting.
- Construct a broadly and thoughtfully diversified portfolio using Azzad’s lineup of institutional money managers.
- Adopt a systematic approach to rebalancing your portfolio.
Increasing the odds of investment success is about having a gameplan that provides a fighting chance of achieving your goals–and then reducing both noise and fear when the challenges roll in. Please reach out to your Azzad advisor with questions.
All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.