Devik Jain and Davide Barbuscia

(Reuters) – Wall Street continues to hover near correction territory. Wall Street assesses the impact of Russia-Ukraine conflict on asset prices. Some strategists warn investors not to lose their cool, and instead focus on long-term trends in the market.

Worries over geopolitical strife and a more hawkish Fed have combined to take the S&P 500 down nearly 10% from an all-time high hit in early January.

Investors waited to see if the United States would announce new severe sanctions against Russia following Moscow’s recognition of two separatist regions in Ukraine and sending troops to them. The benchmark index fell around 1% Tuesday.

Some analysts still believe that longer-term impacts of the geopolitical turmoil could be temporary and they urge investors not to react too quickly to the recent market changes.

“We do not see any reason to panic at this stage,” said Charles Henry Monchau, chief investment officer at Bank SYZ in Geneva, Switzerland. “While most Western media comments sound alarming, we might actually get close to ‘peak fear’ on this crisis and there is a high probability that tensions will start to abate from here on.”

Monchau maintained his exposure in equities, while allocating some of his portfolio to Gold. This is a common haven for those who are experiencing economic or political uncertainty.

How the worsening confrontation in Eastern Europe could impact the Fed’s actions has been one key topic of debate. While some have worried that rising oil prices – which stand around their highest level since 2014 – could push up inflation and force the central bank to become even more aggressive, others believe the market uncertainty could mitigate the central bank’s hawkishness.

The markets are pricing in about 165 points interest rate rises by February next year. [FEDWATCH]

“Overly restrictive monetary policy could result in an outright policy error especially if the business cycle continues to deteriorate,” wrote Dubravko Lakos-Bujas, chief equity markets strategist at JPMorgan (NYSE:), in a note to investors. “The Russia/Ukraine crisis could force a reassessment of the Fed tightening path resulting in central banks turning less hawkish, while policymakers may consider additional fiscal stimulus.”

Jim Reid, Deutsche Bank (DE:), pointed to the bank’s data on how markets have behaved in past geopolitical crises. Selloffs in the S&P resulting from geopolitical events have typically been short-lived, with the index falling some 6% to 8% on average, taking three weeks to reach a bottom and another three weeks to recover to prior levels.

“Ultimately, the underlying economic context tends to dominate, so if you believe the template, much might depend on what you thought momentum was before the sell-off,” Reid wrote in a Monday note.

Truist Advisory Services analyst said that a recent drop in investor sentiment might be a good reason to buy stocks.

According to the American Association of Individual Investors, 19.2% of respondents said that stocks would rise in the next six months. This is the lowest percentage since May 2016. The S&P 500 was higher three months later 94% of the time with an average gain of 6.7% after similar past readings, Truist analysts wrote in a note on Tuesday.

According to them, “Historically, crisis/military events have caused volatility to markets… stocks usually rebound after the event unless it causes an economic recession.”

Analysts still believe that the market will continue to be agitated in the near future.

The conflict “just prolongs the uncertainties that are in the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “These uncertainties mean negative sentiment and so even positive news is just put on the back burner.”