War in Ukraine: What Does it Mean for Long-Term Investors?

By Mitchell J. Smilowitz, CPA

Russia has launched a full-scale attack on Ukraine. The United States and its allies responded with significant economic sanctions against Russia and military aid for Ukraine. Stock markets around the world have declined sharply. With the global economy already struggling to recover from the pandemic, supply chain disruptions and inflation, what additional challenges will the fighting in Ukraine create for long-term retirement investors?

How Should Investors Respond?

What Are the Likely Economic Effects of Russia’s Invasion of Ukraine?

While geopolitical crises often create short-term volatility, history shows that they rarely have long-term consequences. The Cuban Missile Crisis, the fall of the Soviet Union and 9/11 all resulted in short-term, fear-driven market declines. But markets recovered quickly from these shocks because they did not have significant impact on the economic fundamentals of developed economies.

While the Russian economy is only 1/20 the size of the U.S. economy, Russia is the source of nearly 50% of Europe’s energy. As a result, this crisis does pose global risk for higher energy prices and increased market volatility. Russia is also a major source of nickel and palladium, critical components for catalytic converters, and Russia and Ukraine are major producers of iron ore, corn and wheat. Disruption in the supply of these commodities may increase inflation globally and slow post-pandemic economic expansion.

The U.S. is relatively insulated from the economic impact of the conflict because we produce most of our own energy and food. At the same time, the U.S. can expect additional inflation from higher energy prices worldwide. This global uncertainty may cause the Federal Reserve to re-examine the frequency and magnitude of its expected interest rate increases in 2022.

Sanctions imposed by the U.S. and its allies can also increase the economic impact on European and U.S. economies. Russia is likely to respond by reducing the supply of energy and other raw materials needed in the West.


It is often said that the stock market hates uncertainty. The current situation demonstrates the truth of that proverb. And, as of this writing, many areas of uncertainty remain. How will the Russian invasion of Ukraine affect the global economy? Will the U.S. and its NATO allies issue harsher sanctions? Will Russia respond by limiting exports of commodities used to grease the gears of the global economy? What will the U.S. Federal Reserve do?

The risks are significant, but your best strategy for protecting your portfolio is to:

March 2022