28th February 2022 – Jenna Duffett – Chartered Financial Planner

Following our market bulletin last week ahead of the invasion of Ukraine, sadly the inevitable did happen and Russia invaded progressing towards Kyiv as we write.

Russia wakes today with news of the Ruble free falling as financial restrictions of an unprecedented nature are brought in by all.  Putin may not be feeling the military strength of NATO at the moment but will most certainly feel the freezing of assets and ability to access reserves.

Financial markets had anticipated the escalation of events, but of course the reality has caused further turbulence.  In the coming weeks we can expect to see inflationary pressures continue and the implications of the freezing of Russia’s wealth will create volatility in financial markets.  Many European countries remain heavy importers of gas from Russia and so only some banks have been removed from the global SWIFT payments system.

So where is there to hide?  I am afraid in times of war there are no real safe havens for investment.  It remains important that you retain cash in your bank and deposit accounts whilst we ride through this period.

As we advised in our bulletin, the fundamental position of your portfolio remains sensible.  The assets that are held in the portfolio are those that are required by the world to continue to live and grow and the stable things of life, whether this is food, energy or the technology we all rely on.

As history shows when wars happen, markets fall, but what goes down will eventually come back up.  Timelines for recovery in recent years have become shorter and shorter as the world has become instantaneous.  News from Ukraine reaches us within minutes via social media and news bulletins.  In years gone by news from war would take weeks to filter through.  And so, the events will unfold, markets will react quickly, and a resolution will eventually happen.

In the coming months we continue see markets remaining volatile as good and bad news continues.  Energy prices and food will all continue to rise much as we expected before this invasion even started.  Equities have always proven in history to be the best place to be to beat inflation over the longer term.  For now, markets run to safe havens of old traditional assets, but as we have said time and again, you cannot eat a gold bar! 

By Friday many global indices had fallen significantly with the MSCI World Index reaching -8.11% (tracking the shape of global equities) since the start of the year.  Our high and medium high portfolios, declined by just over 10% since the start of the year.

Although they, along with the wider market subsequently benefited when prices bounced back on Friday afternoon, it is likely that we will continue to see values react to news as it happens and in the coming weeks the medium portfolio may also reach this point.  At the start of COVID which was a huge global pandemic, we saw markets fall by a far greater amount, but as you know they recovered within that year. 

We continue to remain focused on seeking opportunities that will inevitably come from this period.  We will all move forward into some different form of normality and adapt as human beings always do.  That new normality is where we need to head in the investment strategy.

In coming weeks, we may be in touch with new ideas and buying opportunities.  In the opposite direction, now with markets as they are it is an excellent time to buy funds if you can afford to do so and take that longer term view. 

As we have said now is the time to use those cash reserves in the bank, but if you have any concerns about your cash levels, please do not hesitate to contact us.