“Geopolitical jitters” are going to keep equity markets volatile for at least the short term, according to Bob Doll, chief investment officer at the faith-based investment firm Crossmark Global Investments.

The unfolding situation in Ukraine will overwhelm all other market variables, Doll said in an interview. “But before bullets began to fly, inflation and interest rates were top of mind and investors will return to those concerns eventually. You can’t lose sight of that, but, right now, there are more important things to think about,” he said.

Doll predicted some economic growth for the year with lots of volatility. “If you have some money set aside and see something you have wanted to buy, buy when the market is low. Then when the market goes back up, trim a little from somewhere else,” said Doll, who is known for his annual 10 market predictions.

Markets hate uncertainty, Doll said. “As uncertainty rises, markets go down,” and the world is facing massive uncertainty now. But that calls for measured actions from advisors and their clients, rather than over-reacting, he said. “It is going to be a frustrating year for investors.”

Doll added in a market commentary that short-term volatility in both directions is likely to continue with events in Ukraine, but the investment climate will likely remain challenging for some time. “An optimistic scenario in which the major Russian invasion soon calms down before doing much damage to the global economy would bring a sigh of relief to equity and credit markets," he said. "The pessimistic scenario of a protracted and intense military conflict would likely weaken confidence in the European economic recovery, with adverse spillover implications for global growth, while muting the rate-hiking cycle.”

Right now no one can accurately predict the outcome, he said. The continuing conflict also will slow economic growth and push inflation even higher over the short term, leading to unknown outcomes over the long term.

“The war is testing European unity and will turn countries inward to shore up supply chains,” Doll added. “While we expect the Russian military invasion to soon settle into a messy anti-insurgency operation, it is premature to dismiss a more negative outcome that further damages investor sentiment, drives oil prices higher, induces more crippling economic and financial sanctions against Russia and materially weakens the European economic recovery in the coming months”

Doll recommended investments in pro-growth assets if the war slogs on, as some economic growth will continue.

“Prior to the crisis, the U.S. and European economies were back on track for a pickup in growth as Omicron fades, mobility improves and service sectors more fully open,” he said. “At the same time, underlying inflationary pressures will remain stickier and higher than central banks or markets are expecting,” he predicted. “In this scenario, the Fed will still be on a course of steady interest rate hikes, with many other major central banks following suit.”

Doll predicted the Federal Reserve Board will raise interest rates by 25 basis points this month, while being careful not to jeopardize the slow economic expansion in order to rapidly bring down inflation.

For fixed income, Doll said bond yields will trend higher over the next year, while earnings will provide some tailwinds for equities.

“With bond and equity market volatility expected to remain high for the near-term, we remain overweight cash, neutral on equities and underweight bonds,” he explained.