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Experts say the way investors plan for retirement may need to change as the conflict in Ukraine alters the global economy.

PA

Russia’s invasion of Ukraine shook the global economy and panicked investors, prompting market pundits to reconsider their financial philosophies.

Decades of relative harmony among the world’s greatest nations have fostered an international trading ground, but Russia’s attack on Ukraine has disrupted that unity, sparking what some fear is “the Cold War.” 2.0″.

“At the end of the day, that’s the future I envision,” Peter Berezin, strategist at BCA Research, a Montreal-based investment advisory firm, told The New York Times. “We are going to move to a world where the world is less globalized. And globalism is deflationary. So we are at an inflection point for bond yields and inflation, and we will enter inflationary environments.

This does not mean that investors should abandon their immediate strategies. Flipping your wallet in response to a war can be treacherous, advisers say.

“Don’t take out your money. Don’t stop investing,” Jeremy Schneider, finance expert at the Personal Finance Club, told Time Magazine. “Any reaction you have to the situation is more likely to hurt you than help you.”

But a fragmented market could force investors to reconsider their future approaches to wealth management.

Consumer inflation jumped 7.9% over the past year, according to a report released Thursday by the US Department of Labor. The increase mirrors the 12 months ending in February – before oil and gas prices spiked – and still marks the biggest rise in 40 years.

Christian Lundblad, Distinguished Professor of Finance at UNC-Chapel Hill, expects such numbers to persist, introducing a complex investment environment.

“If this creates some sort of new world order,” Lundblad told The News & Observer, “perhaps where there’s more fragmentation of the kind of globalization we’ve seen since the end of the Cold War, it means that the arguments for how we want to structure a well-diversified portfolio become more complicated.

Investors have been shielded from intense inflationary pressures for decades. Not since the early 1980s have inflation numbers looked like they do today.

“Basically every American has benefited from a low inflation environment for a very long time,” Lundblad said. “Your typical 401(k) investor – there’s a generation or two of people who never had to think about it. You want to think about your savings and your retirement allowance in a world where inflation is more on the table.

Institutional investors – such as investment banks, mutual funds and universities – are already adjusting their portfolios to erect a hedge against inflation. The industry’s bet is to allocate more money to “real assets”, according to Lundblad, “which are assets that have some inherent value and are maybe a bit more protected or maybe even benefit of a tailwind in an inflationary environment”.

“So it’s kind of new,” Lundblad said. “And then that, plus an appreciation of what the inflation story looks like, suggests we’re going to have to rethink a bit where we want to go.”

Lars Dolder is a business reporter at The News & Observer focusing on retail.