Quarterly Market Commentary

March 1st, 2022

CFG Wealth Management – Commentary on War in Ukraine & Market Volatility

Dear Client:

As if investors needed more to contend with, having already been forced to digest the prospect of a hawkish Fed, higher interest rates, and stubbornly high inflation to begin the year, Russia did the unthinkable last month and invaded its neighbor Ukraine further unsettling an already skittish market. As a result of the military action, and fears of what economic sanctions and higher energy and commodity prices could mean for economies around the globe, equity prices resumed their downward move with S&P 500 Index notching a closing low of this correction thus far of 4,170.70 on March 8th. Through yesterday, the S&P 500 is now down 13.05% for the year, placing it firmly in correction territory, which is technically defined as a decline from a previous high of 10% to 20%.

The primary concern roiling markets currently is whether higher oil and gas prices will ultimately lead to enough demand destruction to send the U.S. economy into recession. This concern is further complicated by the inflationary impact of higher energy prices, adding to what was already a higher than acceptable inflation rate, and the possibility of it forcing the Federal Reserve to raise interest rates more aggressively, which could also be recessionary. We are monitoring these primary near-term factors closely in how they may impact your portfolios and our investment strategies, but for now believe it should be something to continue to watch rather than to take specific action on. The U.S. consumer is in better financial shape on average than they’ve been in many years, with higher savings rates and lower debt levels, and may deal with higher prices at the pump by utilizing savings to maintain previous spending rates. It’s also important to note that global oil producers may bring more supply online reducing some of the upward pressure on oil prices. Still, there are elevated near-term risks facing investors and be sure that we are closely watching how these risks continue to evolve and develop.

With that, we would also like to stress that while geopolitical events such as the unfolding situation in Ukraine are significant, if we use other recent events such as the Brexit referendum or the Greek debt crisis as a guide, we are reminded that they often have less of an impact on markets in the long term and can offer opportunities for those willing to stomach the short-term volatility. In fact, if we look at every major geopolitical crisis since Germany invaded France in 1940, the S&P 500 has been higher 1-year later 83% of the time, with an average gain over that year of 12.30%.*  Also, there is still plenty of things to be positive about …

Valuations have come back to earth. As stock prices have decreased, their valuations have become much more attractive. For example, the trailing price-to earnings ratio for the S&P 500 stands at 21.6 times earnings, below where it began the year at 24.7x, and well below its peak in 2021 of 32x. The ten-year average price to earnings ratio for the S&P 500 is 20x, meaning the index is currently slightly above its long-term average.

Earnings growth continues to be strong. We believe earnings growth is ultimately what drives markets over the long term, and earnings results for U.S. companies continue to come in strong. For Q4 2021, the blended earnings growth for the S&P 500 is 30.9% (with 84% of constituents reported). If this is the actual growth rate for the quarter, it will be the fourth straight quarter of earnings growth above 30%. Additionally, companies within the S&P 500 overall have very little revenue exposure to Russia and

Ukraine, with the combined exposure at about 1%.

The economic outlook is positive. Coming out of the depths of the pandemic, the economic outlook remains positive as we exit the early cycle recovery. GDP growth for Q4 came in at 7.0% annualized, the ISM Manufacturing and Services Indexes remain firmly in expansionary territory, and the unemployment rate has dropped to 4.0%. We believe a strong U.S. consumer will ultimately drive economic growth moving forward, as pent-up demand from the Pandemic ultimately fuels the recovery.

While volatility can be unpleasant, we believe the outlook within the U.S. is largely unaffected by the unfolding situation in Ukraine. We still believe there are plenty of reasons to remain constructive on the stock market, as valuations have become much more reasonable, earnings growth looks to continue its strong run and has very little exposure to the two countries involved in the conflict, and the economic outlook still looks positive. In our eyes, the market impact will likely only be in the short-term, so for now, depending on individual circumstances, we feel the best course of action is to remain disciplined, and stay the course.

If you have any concerns and would like to discuss your accounts or anything related to your individual situations, we are here to answer your questions. Please don’t hesitate to call our office at (858) 550-3960.


Sincerely yours,


Graydon Coghlan, CRPC – President/CEO
Registered Representative, Securities America, Inc.
Financial Advisor, Securities America Advisors, Inc.
CA Insurance License #0B31440


4370 La Jolla Village Drive, Suite 630
San Diego, CA 92122
(858) 550-3960 (phone)
(858) 550-3969 (fax)


All opinions and estimates included are as of the date listed and are subject to change without notice. This letter is provided for informational purposes only. It is not intended as an offer or solicitation with respect to the purchase or sale of any security or offering of individual investment advice. The S&P 500 Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. An investor cannot invest directly in an index. Past performance does not guarantee future results. * Source: Glenview Trust Company

Securities offered through Securities America Inc., a Registered Broker/Dealer Member FINRA/SIPC, Advisory services offered through Securities America Advisors Inc., an SEC Registered Investment Advisor, CFG Wealth Management and Securities America are not affiliated.  Trading instructions sent via e-mail may not be honored. Please contact my office at (858) 550-3960 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential, and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated.  03/22

Comments are closed.

Contact us:
Scroll To Top