Hey everybody.

David Chudick here.

Geopolitical events can feel catastrophic in the moment.

History says otherwise.

And my job here today is to separate emotion from decision making.

And we're going to talk about concrete and productive steps that investors can take now during the Iran conflict.

Hope that you enjoy this episode.

You are listening to the weekly Wealth Podcast.

My name is David Chudick and I am a Certified Financial planner.

This podcast is where business owners, the high net worth and the mass affluent come to think differently about their money and also to learn differently about their money.

These are the conversations that I'm having in my wealth management practice on a daily basis.

And let me set the stage for this episode.

The US Israeli military strikes on Iran began February 28, 2026.

Since then, Brent crude oil has surged

above $100 per barrel.

The Straits of Hormuz, which carries roughly 20% of the world's oil supply, has been effectively closed.

The S and P is down roughly 3% from the start of the conflict.

And meanwhile the Vix, which is known as the fear index, sits at around

23 elevated but nowhere near the spike of 52 plus we saw during the April 2025 panic.

So we have a lot of things going on right now in the world and I want to talk to you about some some of the things that you should be doing, some of the things you should be thinking about, and maybe some of the things that you shouldn't be doing during this period of conflict.

So here's what history tells us now.

According to this Stock Trader Almanac data covering 17 geopolitical incidents since 1939, the average 1 week s&p drop after initial shock is 1.09%.

Now 12 months later, the S and P has historically posted an average gain of 2.92.

Now after Russia invaded Ukraine in February 22nd, the S&P gained 3.27 in the first week.

In 20 major post World War II military interventions analyzed by RBC Wealth Management, the S and P fell an average of 6%.

The current situation is not a repeat of the 1973 Arab oil embargo.

And that's kind of a worst case scenario when the S and P fel 34% in the following year.

The US is now a top oil producer and far less oil dependent than it was in previous energy shocks.

So the bottom line is markets have seen things like this before and panic is almost never the right strategy.

So what are some strategies, what are some things that you should be doing right now during these periods of market fears?

So here's the first thing I would love for you to reevaluate your risk tolerance.

Now let's remember, risk tolerance isn't just about what you say you can handle.

It's what you actually feel when your balance drops during years.

And we've had a few good ones over the past decades or so where we've had 10, 12, 15, 18, 20% rates of return over several years in a row.

Everybody says, yeah, I have high risk tolerance.

I'm willing to take risky gambles and have high risk portfolios.

But you tend to forget what it's like to lose money when you have several years in a row of high gains.

So let's evaluate how much risk you are willing to take.

So this may not be a time to radically shift your allocation, but it may be the time to acknowledge a mismatch between your stated risk profile and your actual emotional response.

So small adjustments may make sense.

Maybe shifting from 80, 20 equities and which is 80% stocks, 20% bonds, maybe to a 70, 30.

That's not panic selling, that's just recalibration.

So here are some questions to ask yourself.

If the if this dropped another 20% and stayed there for two years, could I stay the course?

And if the answer is no, then your allocation might need adjusting.

So if you've ever had like a numerical value set to your risk tolerance, that can be a really, really great thing.

And if this is something interests you, just email me davidarallelfinancial.com I'd be happy to give you a complimentary risk number.

It's a short questionnaire and it'll help you to determine what your risk tolerance is.

And then you can look to match your portfolio construction to your risk.

Again, what I find is during periods of prolonged market growth, everybody says that they have a high risk tolerance.

But when things start going south, when things go down a little bit, sometimes people, people tend to freak out.

So I think the first thing that we need to do is reevaluate our risk tolerance.

So here's the next thing I'd like you to do when we're going through periods of volatility.

Now again, sometimes when there are some geopolitical events, maybe wars, maybe pandemics, maybe things like that, the markets tend to make movements that are not necessarily related to the actual performance or details of your holdings.

So let's think about your cash needs.

And remember, the worst time to sell a stock or a position is when you're forced to sell sell them and when they are down.

So let's pull up your financial calendar.

Do you have any large expenses coming due in the next 12, in the next 24 months?

Do you have a home purchase?

Maybe you're like me, you have some college tuition to pay.

Maybe you know that you'll be needing a new car in the next six to 12 months.

And you're not someone who likes borrowing money for cars, so you want to have some cash available to buy that new car.

Or let's go to a different scenario.

Let's say you are in the distribution phase of your life, so you longer

looking to accumulate money.

You are now taking money every week, every month, every two weeks, or anything like that from your investment accounts.

And these are designed to support your lifestyle, maybe to supplement your pensions, your Social Security, your rental property income, your other passive income.

This is a time for us to reassess how much cash or really, when I say cash, I'm talking about cash equivalents.

So things like money markets, CDs, things like that, that'll be earning at least a little bit of interest.

But let's assess how much cash we should be holding.

Now, in many cases, it makes my retiree clients have a little bit more peace of mind to know that they have 12 months of living expenses held in cash.

Now, what you're giving up when you have money in cash is you're giving up the potential for it to have high rates of return, but you're also giving up the chance that it may go down in value.

Evaluating how much cash or cash equivalents

that you should have on hand is

something you should do always.

But when we have some extraordinary market

volatility, this is just a chance.

It's a chance to reevaluate your risk tolerance, which was our first item.

And it's also a chance to reevaluate the amount of cash that you should keep on hand.

Now remember, in financial planning, there's not always an all or nothing like I have to do this sometimes there's a bell curve, there's a range.

So the amount of cash maybe that

would make you feel comfortable probably would

be different than the amount of cash that I should have in order to make me feel comfortable.

Now, there could be an unreasonably small amount of cash that I might strongly disagree with as your financial advisor.

And then there could be a point

where I disagree with how much cash you want to hold.

So I might say, yeah, maybe having

five years worth of cash is a

little bit excessive because we do have to have our money, have a chance to grow and outpace inflation.

But this is an area that there is some discretion and there's some ability to have a range of values of what's reasonable.

Do you know what tax loss harvesting is?

Well, the government is actually willing to share in your losses, so you should take them up on it.

Now if you have some positions that are down from your cost basis, that means, let's say you have a position that you paid, I don't know, $100 for, and now it has gone down to $70.

So if this is due to just normal market actions, or if it's due to some geopolitical event like what's happening in the Middle east right now, you can sell them, you can lock in the loss for tax purposes, you can use those losses to offset some other gains.

Now you need to understand the wash sale rule and you need to understand that this works in non retirement accounts.

So this does not work in your IRAs and your, in your 401ks, things like that.

So these harvested losses can offset capital gains elsewhere in your portfolio and up to $3,000 a year can offset income with the rest carrying forward.

So tax loss harvesting is a great opportunity to take something that's not really a great thing, which is a down market, and turn it into something that can benefit you tax wise.

Now another thing to consider when the markets are down are Roth conversions.

And Roth conversions are just simply when you move money from your traditional ira, which is pre tax, to a Roth

ira, which is after tax.

Now the key is you pay taxes on the amount converted.

So if you had a million dollar IRA and if you convert 100,000 of it into your Roth, yes, that does create $100,000 income.

And you may, I don't know, pay tax.

Your tax bill on that may be

20 or $30,000, depending on what your marginal rate is.

But if your balance is lower due to the downturn, you're actually converting at a discount.

So here's an example.

If your $100,000 IRA has dropped to 82,000, if you convert that 82,000 now, you'll pay taxes on that 82,000 instead of paying taxes on the 100,000.

Now, if this is a temporary decline due to geopolitical events, and if that 82,000 goes back up to 100,000 or more, that means of that future growth would be tax free.

So the best candidates for Roth conversions obviously are going to be those who are temporarily in a lower income this year.

So maybe you typically get a big bonus and you're not projected to get that this year maybe you only worked part of the year, but if you're in a lower tax bracket this year, you may want to consider Roth conversions.

Now, Roth conversions have so many benefits later on they can help you to reduce your RMDs when you get to that age.

And honestly, from an estate planning standpoint, if you were going to leave some money to me, I would much rather inherit a Roth IRA from you than a traditional IRA from you due to how that money has to be distributed.

But it's really important to make sure that you can pay the tax bill from an outside account on your Roth conversions, because this will create something that's called phantom income.

So let's get real here.

You can't control what Iran does.

You can't control what Covid does.

You can't control tariffs.

You can't control if the Democrats get elected, you can't control if the Republicans can get elected.

But here's what you can control.

You can control whether you take on more debt.

You can control if you have savings.

You can control if you live within your means.

So let's build what I call a financial fortress.

Okay?

So when the market drops, there are essentially two kinds of investors.

We have the vulnerable investor and this person maybe has high interest debt, especially credit cards, personal loans.

They have little or no emergency fund.

They're probably living paycheck to paycheck or close to it.

They have no financial plan that's written.

They're relying on investments for near term cash needs.

And as a result they might be forced to sell at the worst possible time, missed a recovery and that can take five to seven years longer to return to their pre crisis financial position.

So look at all of those things.

Many of those things were under the personal control of the investor.

Now what about a resilient investor?

This person probably has manageable or no consumer debt.

They probably have three to six months of living expenses saved in cash, hopefully 12 months or more if they're retired.

They probably have a written financial plan that anticipated volatility.

Right, because we always know that volatility is coming.

We just don't necessari know when.

They have investment time horizons that don't require near term liquidation.

And here's their result.

They can ride it out, they can keep contributing.

Maybe they can take advantage of lower stock prices and get have a lower entry point into some of their investments.

And oftentimes they can emerge financially stronger than they were before the downturn.

So I want to tell you a story I can't tell you his name due to privacy reasons.

But last year, I have a really good client, and he was getting ready to retire right around the time when the markets took a crash due to the tariffs.

Now, this guy and his wife, they're amazing people.

They have put themselves in a position to where their.

Their income was more than their expenses.

So, yes, their accounts did go backwards.

All of our accounts went backwards.

Right?

And what.

What he told me was like, we're just gonna.

We're gonna leave our accounts there.

We're gonna live off of our other incomes, and we're gonna leave our accounts there, and we're going to give our accounts time to come back.

Now, they were able to do this because they had minimal debt.

Actually, I think they had no debt.

They live a relatively modest lifestyle, and that gave them peace of mind.

All right, so, yes, things happen.

We have geopolitical events.

We have maybe even monetary policies that we may or may not agree with.

And we don't have direct control over that, but we do have direct control over how we live our lives.

Moving up to that.

So remember a couple things that are.

That should be your five pillars of a personal balance sheet.

You got to have your emergency fund.

This is your shock absorber, right?

So it's three to six months or more of household expenses in an account.

And that allows you to not be forced to liquidate your investment accounts for money if they drop unexpectedly.

Of course there's debt.

That's the silent portfolio killer.

So when a downturn hits, the households with manageable debt and monthly obligations are able to weather the storm the best.

But those who have higher debt payments are having more struggles, of course, income diversification.

Try not to have one single point of failure.

So if you're in your retirement, in your distribution phase, yes, it really hurts if your investment accounts go backwards.

But what about if you have some rental properties?

What if you have a pension?

What if you have a side hustle, things like that.

So try not to have one single point of failure.

Of course, insurance, this is something that we don't talk about or that most financial advisors don't talk about.

I talk about it a lot.

But insurance, at its core, simply protects your money.

So think about this.

Let's say you cause a major car accident.

And let's say you had an investment account that was a million dollars, but it dropped to $750,000 due to some geopolitical event.

Now, you caused a major car accident.

I sue you, and now you have to use your money to pay me back.

But in this Hypothetical case, you are going to have to liquidate part of your account while it's down.

So that is a double whammy.

So make sure you're working with a great local independent insurance agency to make sure that you are managing your risks properly.

Then, of course, we have the written financial plan.

This is your inoculation against panic.

So in the financial planning software that I use, we have stress test and we are able to look at if some bad scenarios happen, what are the likelihood that you can weather those storms again?

We know that the down markets are coming.

We don't always know when, but we know that there will be downturns.

And if we are not planning for them, then we certainly will have some undue financial stress.

All right, so now I want to talk to you about a couple things that maybe you shouldn't be doing during times of market downturn.

So the first thing is maybe we should turn off the news, and maybe we should stop looking at social media so much.

And this is one of the most important and often overlooked financial advice that you can get.

Because remember, the news and social media, those are engagement machines.

And the way it makes money is by making you feel things, specifically outrage, fear, anxiety.

And those emotions, if they're left unchecked, will cost you money.

Now, how many planes don't crash on an average day?

Like, it's literally thousands of flights.

But if there is a plane that crashes, it is all over the news, because fear and if it bleeds, it leads are what gets clicks and what gets viewers.

So these platforms aren't neutral conveyors of information.

They are deliberately engineered to provoke you.

Now, really, interestingly, when Facebook introduced reaction emojis, engineers discovered that the angry reactions generated five times more engagements than the likes of, and that weight was fed directly into the ranking algorithm.

So the bottom line is the platforms are not showing you what's most important.

They're showing you what's designed to keep you agitated.

And that is their business model.

Now, if you start making financial decisions based on what agitates you, maybe if the candidate that you wanted to get elected did or didn't get elected, then you might make unwise and emotional decisions.

So let's keep that in mind, that turning off the news and maybe limiting social media could be a way for you to avoid making irrational financial decisions.

Now, a couple other things maybe we should try not to do.

Don't try to time the market.

Nobody knows when the conflict will resolve

or when the bottom has hit.

So attempting to get out and in at the right and wrong times is just really, really difficult.

Probably you shouldn't abandon your automatic contributions.

If you stop your 401k during a downturn, it's giving you the benefit.

It's giving up your best buying opportunities.

If you check your portfolio daily or even more frequently than that, it can really add some undue stress.

And don't confuse that.

This feels different from this is different.

Every crisis feels like it's unprecedented, but look at some of the things that have happened over the last year and decade and the world hasn't ended yet.

Sometimes it feels like it's coming to an end, but it actually has not happened yet.

And finally, let's not ignore your cash flow reality.

This is one scenario where you should rethink things if you genuinely need liquidity in the near term that you don't have.

That's not emotion, that is planning.

So let's close out the show with this.

Let's use this conflict, let's use this volatility as a moment of an audit, not as a fire drill.

If you don't have a financial advisor, this might be a great time to get one.

Now I know a good one and you're listening to him right now.

If that interests you, you can schedule your vision.

Call www.weeklywealthpodcast.com vision and we can spend about 10 minutes talking about one or two of your financial issues.

And then finally, let's acknowledge that if you are stressed, it is okay.

There is nothing to be ashamed of.

There's nothing wrong with financial or emotional stress.

So don't feel like you're a bad person.

Don't feel like you're failing if you have some stress.

But what I find is that action can defeat stress.

All right, everybody, that'll wrap up this episode.

Until next episode, I wish everybody a blessed week.

Thanks.

The information contained herein included but not limited to research, market valuations, calculations, estimates and other materials obtained from Parallel Financial and other sources are believed to be reliable.

However, Parallel Financial does not warrant its accuracy or completeness.

These materials are provided for informational purposes only and should not be used for or construed as an offer to sell or a solicitation of an offer to buy any security.

Past performance is not indicative of any future results.

And here is your bonus content for this week's episode and that is that you can only take advantage of a down market if you have the the cash and the financial foundation to do so.

This is why the balance sheet work should come first and then you can be opportunistic if you're not in survival mode.

So get your financial house in order,

and then you can take advantage of almost all scenarios.

All right, everybody, we'll see you next week.