Energy prices, inflation, and Russia's invasion of Ukraine dominated the news during another tumultuous week in our financial markets. Gasoline prices have risen dramatically in the last week as President Biden's announcement to prohibit the import of Russian oil took hold. As alternate sources of supply are investigated, petroleum prices will most likely only increase. While releasing a portion of the U.S. strategic reserves may appear to be the best course of action in the short term, we will need to rely largely on OPEC members and other oil-rich nations to raise output and cover the gaps. Whatever happens, we will undoubtedly be paying significantly higher costs for the foreseeable future. This will have a direct impact on already high inflation levels, resulting in further volatility in the weeks ahead. This is certainly not where we expected to be as the first quarter of the year is close to completion, but a new reality we will have to endure.
The consumer price index (CPI) for February rose 7.9% from a year ago, reaching its highest level since 1982. The largest contributors to the significant increase were gasoline, food, and housing, which should come as no surprise. These financial burdens are having an impact of each of us daily. If there was a silver lining in the numbers, it was that auto prices have begun to moderate slightly. It's still too early to know if this is merely pricing fatigue, actual demand shifts, or simply customers feeling nervous in the current environment. The weakness in the technology sectors remains in place for now. Until we have more clarity on the global and geopolitical front, the “high-flyers” of the last several years will stay in the backseat as a flight to value and safety stays in focus.
Over the last week, we have been working on rebalancing our investment portfolios. Our allocations may become over or underweighted, as is common during times like this, depending on the specific asset class. Adjusting them as needed to get back on track with our stated goals is prudent and timely. This strategy has proven to be effective in the past, especially during the early months of the Covid pandemic. Our goal is not to "time" the market; rather, we seek to take advantage of the current environment's reduced share prices where appropriate. This is one of the tools we can utilize to stay on track with your longer-term goals.
I know these are strange times for many of us and just as we were getting our proverbial feet under us again, the world took another turn. We have seen these types of events before and it certainly won’t be the last. Hang in there!
Have a nice weekend.