Democracy and Economic Opportunity

How I’m thinking about Ukraine and Russia.

Thinking about lives lost and disrupted, as well as what this market turmoil means for clients.

First things first.

There’s no other way to say this: war is dreadful, even more so when it’s unprovoked. I am not an expert on geopolitics, but I do consider it part of my job to stay on top of global stories and trends that impact our lives.

For that reason, I’m sharing two resources that help me think through the social, political and economic consequences of this war.

For the human perspective, I appreciated this one from Garrett Bucks. As he puts it: “Some reminders that I needed today as I watched bombs fall on human homes and tanks roll down human streets.”

The second resource is a podcast interview with Molly McKew, an independent and non-partisan expert on Russian influence and warfare.

I think of both of these perspectives are incredibly important to keep top of mind right now. While the war is still far from our shores, Putin and authoritarians around the world (both at home and abroad) have democracy in their crosshairs. They are tearing away at democracy with real warfare and information warfare designed to keep us angry at people who don’t look like us, think like us, or agree with us. We can’t let them win by tearing us apart. We must instead reaffirm our shared values and commitments to one another.

The America I know and love believes in democracy, equality of opportunity, and community. When democracy thrives, economies thrive, and when economies thrive, people and families thrive personally and financially.

To put it selfishly and plainly: if we want our portfolios to grow and sustain our long-term needs, we must be engaged citizens. We can’t have one without the other. Our capitalist economy depends on a strong democracy that robustly denies all forms of authoritarianism on and offshore.

That’s why you’re reading a blog post from a financial planner about democracy.


Second: what you need to know about Russia and Ukraine in our client portfolios.

Russia is considered an “emerging market” and Ukraine is considered a “frontier market”. Here is a cartogram showing the approximate relative size of each country’s stock market around the world:

DFA cartogram equities 2020

Here’s what this cartogram means. If you have $100 and you evenly invest it in all of the publicly traded stocks around the world, you would have about $57 in the US, $3 in Canada, $2 in India, etc. Blue boxes are developed countries and gray boxes are emerging market countries.

You may notice that Russia isn’t even titled on this graph. That’s because their public market is extremely small – less than 1% of global market cap (aka the total value of all of their stocks).

Avantis does not hold local Russian or Ukrainian securities in any portfolios. The emerging market strategies have indirect Russian exposure via depositary receipts traded in London and in the US. Total exposure to Russia or any single emerging market is well under 1% of any client portfolio. The sanctions announced on recently did not directly impact any of the Avantis strategies.  If you have any questions or want more details please let me know.

Here is additional perspective from Dimensional on geopolitical events, as well as from Avantis on keeping the long view in mind during market volatility.

Finally, for a bit of additional perspective, here is a graph from 2021. Obviously, not every year will have positive stock returns, but it’s worth noting that volatility is an inherent part of investing. Keep your long-term goals in mind and keep a robust emergency fund of cash on hand to help when you need it most. Liquidity is your best friend.

2021 with news events


Disclosures: Past performance is no guarantee of future results. Fiduciary Financial Planning Group LLC DBA Real Estate Wealth Planning is an Investment Adviser registered with the State of Texas. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned.

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