25 February, 2022

Weekly Update - Russian Attack Roils Markets, Clouds Outlook

Russia’s invasion of Ukraine has caused equity markets to drop and whipsaw with renewed volatility. European and North American stocks initially fell sharply on the news, followed by a somewhat surprising, albeit modest rebound. Commodities prices also reacted, with oil prices breaking through $100 a barrel, and aluminum, nickel, and natural gas prices spiking. 


Russian’s actions have been almost universally condemned.  The U.S. and several key European countries have imposed economic sanctions on Russia in response, with more severe actions likely in the coming days. So far, sanctions have spared Russia’s access to the world’s banking infrastructure, and its oil and gas export economy, which supplies a large portion of Europe’s energy. 


The S&P/TSX fell modestly this week but has generally remained more resilient than equity markets in the U.S. and Europe. Canada’s stock market has a higher composition of energy and commodity names, which have been less affected by the turmoil in Ukraine. Canadian stocks also have lower relative valuations than those in other markets. In the U.S., the S&P 500 and NASDAQ indexes also moved lower this week and are off approximately 10% and 15% respectively year to date. 


Volatility was already a force in world markets based on higher inflation trends, and uncertainty about how strongly central banks would respond with increased interest rates. The situation is now compounded by Russia’s actions this week, leading investors to fear a new source of negative economic impact and still higher inflation pressures. However, it’s possible that central banks will now need to consider a less aggressive approach to interest rate increases, attempting to balance inflation control with maintaining a prudent level of stimulus.


Consumer sentiment, already impacted by higher prices, reduced real incomes, and pandemic fatigue, is likely to take another hit based on geopolitical tensions in the coming months. 


Bond yields have been volatile, moving higher on expectations for central bank action and lower as investors seek safe shelter. The U.S. 10-year Treasury is up significantly year over year, hovering near 2.0%.  Gold prices have also moved higher. Interest rate sensitive tech stocks have moved up and down with shifting sentiment but have largely moved lower on the pressure of higher rates.   


Many important economic indicators have been trending positively, and continued recovery in 2022 is expected. However, new volatility will prevail in the short term. Investors are likely to be tested by near term conditions, however, should remain focused on longer term goals. Political crises and disasters in years past have eventually come to resolution, with equity markets rewarding patient investors. Investment portfolio returns are less volatile over longer holding periods.


  • Short-Term View: Russia’s invasion of Ukraine has caused new levels of uncertainty and amped up market volatility.
  • Longer-Term Thinking: Markets are cyclical over shorter periods and react negatively to uncertainty and geopolitical crisis. However, growth in equities over time is in alignment with long-term historical trends. Maintaining a balanced and diversified portfolio is key to your long-term investment success.
  • Logic Over Emotion: Perspective is key. Focus on long-term goals and timeframes.

Our Experts Say...


“While it’s easy to get caught up in all-or-nothing rhetoric, as thoughtful investors it is our duty and challenge to sift through the news and the noise to make sound investment decisions. While we believe some degree of caution is warranted because financial conditions are tightening, prices are elevated, and the economy is slowing, we are not giving in to the pessimism of the headlines of early 2022.”


James Black

Portfolio Manager

Beutel, Goodman & Company

North American Equity, Canadian Value Specialist





Over the past 10 years, markets are positive. Perspective is key. Markets do react to short-term increases in volatility – see the grey lines below – but the long-term trend is upward in the blue and red lines.



Source: Morningstar Direct. Growth of $100,000 shown. Total returns from Feb. 24, 2012 to Feb. 24, 2022 in local currency. Volatility is illustrated by the rolling 5-day minimum and maximum percentage change for each of the indices shown.