How could the Russian invasion of Ukraine affect your investment portfolio?

I wanted to give my brief, initial thoughts on the Russian invasion of Ukraine, and particularly how this could affect your investment portfolio.

An existing conflict

It is worth noting that tension in the region has been simmering for years even though we, in the West, have remained often unaware. Sadly, that state of ignorance has been shattered with the huge increase in Russian military manoeuvres at the beginning of this year. Of course, this escalated dramatically yesterday, when Russian troops invaded Ukraine. Tragically, the human cost of this incursion is already being seen through various news outlets.

The initial market reaction

As we saw yesterday, the initial market reaction to the invasion was dramatic, with the major indices in the Far East and Europe falling significantly. The FTSE100 closed down nearly 4% on Thursday evening; however, history shows us that geopolitical crises do not tend to have a long-term effect on investment markets.

Markets do not react well to sudden surprises because they cannot price in unforeseen events. This was last seen with the initial outbreak of the pandemic in the Spring of 2020. Although the markets were already jittery over Putin’s remarks and stance on Ukraine, I don’t believe they thought an invasion was on the immediate horizon.

We had already seen a relatively volatile last few weeks on the global markets, and this is no doubt set to continue. Interestingly, after opening down, the US markets actually closed yesterday in positive territory. As I write this on Friday morning, the FTSE100 is up over one percent.

In the long-term

I believe the issue of inflationary pressures on the markets will be exacerbated by the invasion of Ukraine. These pressures were already causing volatility in the markets, with central banks looking to, or already increasing, interest rates to curb rising inflation. After the events of yesterday, we have seen the cost of oil increase and the price of gas is only set to go higher. It is very likely now that the higher cost of living is set to continue for some time to come.

Our view, as always, is that your investment is a long-term one, and this does not change with shocking events such as this week. As we saw with the pandemic, short-term losses have historically always been seen on investment markets, but in the long-term you can see positive returns on your investment portfolios.

If you would like to discuss any aspect of your investment portfolio or financial planning, please do not hesitate to contact us.

Richard Brazier Richard BrazierDirector

Who should you contact for more information?

Director Richard Brazier

Financial Adviser Amanda Beacon

Senior Consultant Graham Smithson