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Just a stone’s throw from our office are small businesses that are part of the fabric of Severna Park, including Pedal Pushers Bicycle Shop, Always Ice Cream and Park Tavern. I love the different members of our community, but it’s easy to forget that the world is much bigger, and outside conflicts can impact our neighbors.
The conflict in Iran has impacted the economy, causing difficulties for everyone, including small businesses here in Maryland and around the country.
At the center of this conflict is the Strait of Hormuz. You’ve likely heard a lot about this waterway, but why is it so important, and why is it hitting our wallets so hard?
Here’s a rundown of why this news matters to you.
The Strait of Hormuz is a waterway between the Persian Gulf and the Gulf of Oman, running right near Iran. It is one of the world’s busiest oil shipping channels, and around 20% of the world’s oil and liquefied natural gas passes through the strait each year, totaling nearly $600 billion of oil.
As soon as the conflict started, the strait became nearly impassable due to the risk of being attacked by drone and missile attacks. Daily traffic was down around 95% since the conflict started in late February through early April, with significant ripple effects on the world’s economy.
Gas and energy prices steadily increased the longer the Strait of Hormuz remained closed. In Maryland, gas prices averaged $3.46 in February, but that jumped to over $4 in just a month.
The S&P 500 experienced five straight losing weeks immediately after the conflict started, and news updates led to rapid swings. Rising fuel prices led to other expenses, including increased delivery costs and mortgage rates.
Any supply chain disruption could significantly impact small businesses in Severna Park and around the country, and regardless of whether the strait is open or not, this impact could be felt at home in the near future.
Investors may understandably feel fear and anxiety as they spend more on gas and other goods, and their retirement portfolios potentially swing up and down with the market volatility. In moments like these, it’s important to remove emotions from your decision-making process.
Higher costs may be hard on your wallet, but there are some steps you can take to make it more manageable within your budget. Consider tracking your budget and identifying expenses that you can cut to keep your spending in check. This could include vacations, dining out or sporting events.
Selling your assets during a volatile market, which has declined in value, might feel like a smart move, but history shows that it could be a mistake. It’s important to focus on time in the market, not timing the market.
I coach clients to think of invested money as being in two categories: red and green money. Red money refers to assets that carry a higher risk of loss but also higher potential returns, such as stocks. Green money is safer money, like municipal bonds and fixed annuities. The growth potential may be lower, but the tradeoff is lower risk. It’s important to avoid allowing short-term market conditions to derail your investment strategy.
A financial advisor can help you navigate these financial storms and devise a strategy that’s appropriate for your unique financial situation. Retirement is about more than just money, and no matter what the future holds for Iran, it’s important to have a trusted financial advisor on your side during uncertain times.
Jason LaBarge, financial advisor and president of LaBarge Financial
7 Riggs Avenue, Severna Park, MD 21146
443-647-4321
www.labargefinancial.com
Securities offered only by duly registered individuals through Madison Avenue Securities LLC (MAS), member FINRA/SIPC. Investment advisory products and services made available through AE Wealth Management LLC (AEWM), a registered investment adviser. MAS and LaBarge Financial are not affiliated companies. Fixed insurance products are offered through the insurance business LaBarge Financial LLC. AEWM and MAS do not offer fixed insurance products. The fixed insurance products offered by LaBarge Financial LLC are not subject to investment advisor requirements. This information is for educational purposes only for use with investment professionals. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual's situation. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investment strategy will be successful. Past performance does not guarantee future results.
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