While Russia’s war on Ukraine impacted the current markets, he noted that the macroeconomic policies, normalizing interest rates, and reverting back on quantitative easing did, too.
“That is having a larger impact on financial markets now than the geopolitical event associated with the Russia-Ukraine situation,” he said.
Hasanjee noted there was an unprecedented bounceback, especially in the equity markets, during COVID because of the central banks’ unprecedented monetary policy and government’s fiscal support. While valuations stretched over 18 months, there was some concern around that before the war and China’s recent lockdown, which sparked concerns about slower growth. Now the central banks are increasing interest rates and ending quantitative easing, which has put pressure on both equity and bond prices.
Vanguard’s recommending that advisors continue to stay the course in these unprecedented times.
“Put a financial plan in place. Establish goals, minimize costs, and have the right asset allocation, using low-cost funds,” he said. “If advisors do all that, over a long period of time, all these factors will essentially fade off. If you look at history, they have faded before. We did study after study that proved that,” he said, noting their studies show stocks always come back strong.
