The ongoing Russian invasion of Ukraine continued to dominate headlines last week, as military actions intensified, and the resulting humanitarian crisis worsened.
Markets remained volatile, as investors assessed how the conflict was likely to affect global supply chains. By Monday, the price of a barrel of oil had topped $130, adding to the pressures around the cost of living. Russia is an integral supplier of both oil and gas to vast swathes of Europe. Concerns of major supply disruption and fears of a potential Western embargo on Russian oil and gas exports has impacted broader market sentiment and increased concerns around the rising cost of gas in Europe and the UK.
As well as fuel, Russia and Ukraine are major global suppliers of commodities such as copper, wheat, nickel, and neon. These rising prices will lead to increasing inflationary pressures. Central Banks were already contending with rising interest rates caused by the COVID-19 pandemic, and so the events in Ukraine will likely have further complicated this issue.
Equity market retreats across Europe were broad based as investors assessed the implications of the Ukrainian crisis. The German DAX and French CAC40 slumped by -10.1% and -10.2% respectively. Mark Holman, Partner at TwentyFour Asset Management, noted European banks were among the hardest hit, as fears of losses prompted many to reduce their holdings. However, he noted: “While this natural risk aversion is logical in the current market, we do not think it is fundamentally well supported, and should eventually present investors with an opportunity. We are confident that Russian and Russia-related exposures are not about to overwhelm the European banking system.
“Russian and Russia-related exposures at European banks are extremely low – they are estimated to be less than 1% of total exposures across the sector.”
UK markets were not quite so severely affected by the events in Ukraine, however the FTSE 100 still fell by 6.7% over the week. Performance was not even – for example defence stocks performed better than banks and retail type companies. Overall, it appears investors have reacted to events by shifting further into less risky assets.
Whilst volatility reached its highest level for more than a year, US equities were less affected. The S&P500 declined by -1.3% with falls in the technology and financial sectors offset by strength in other segments.
Schroders commented: “Beyond these events [in Ukraine], the US economic picture remained broadly unchanged. US growth continues to look robust while inflation is elevated. Most areas of the market struggled in February. Energy was the only sector to make gains, with oil and gas prices increasing steeply. All other sectors declined. The tech and communication services sectors were among the weakest.”
The end of last week also saw the US release its latest payroll data, showing a continued fall in unemployment.
Looking ahead, it seems the geopolitical outlook is volatile and uncertain. Mark Dowding, Chief Investment Officer at Bluebay, commented: “There is a sense that we may trade from headline to headline. Yet, much as we might dearly want to see the plucky heroes in Ukraine prevail, or Russians rise up and depose Putin, there may be a sense that a grinding campaign of devastation appears the most likely outcome for now, given the overwhelming military superiority in Russia’s favour, much of which it has yet to deploy.”
According to Joe Wiggins, Director of Liquid Markets at St. James’s Place, as we can’t predict the future, or how markets will respond to large macro events reliably, investors should bear in mind the old adage of ‘time in the market, not timing the market.’
He said: “It is not that macro events are never significant for markets. There will be incidents in the future that will lead to savage losses in equities; we just won’t be able to predict what will cause them or when they will happen. Trying to anticipate when they will occur, rather than accepting them as an expected feature of long-term investing, will inevitably lead to worse outcomes.”
When you imagine your future, what do you see? Will you be living in Berkshire or the Bahamas or a narrowboat on the Norfolk Broads? Having clear goals is one thing; seeing the path to achieve them is another.
Personal goals are sometimes linked to life milestones: stopping work before you’re 60 or starting a family. Others are based on personal ambitions: learning to fly or starting a business later in life. You might want to give your children the best education you can or leave them a good legacy.
What we’ve learned is that the goals you set yourself should be based on your personal values – who you are and what you believe in.
If you’re passionate about protecting the planet and investing responsibly, you can invest your money to create a better world both for yourself and society.
None of us will ever have the same set of goals, which is why any financial plan should be highly personal and tailored to you. Discussing those personal goals with an adviser is just the first step.
“The first conversation is when you begin to discover what makes people tick, what’s important to them, what’s not,” says Harriet Shepherd, Marketing Proposition Manager at St. James’s Place.
“Then you step back and look at their present financial landscape – cash, savings, ISAs, employer pensions. Setting personal goals is all about managing the money they already have to achieve the future they want.”
But what happens if plans change? You can anticipate the future, but you can’t predict it. A break-up, an unexpected job loss or medical bill may throw you a curve ball. Your personal goals may change over time and having a plan in place protects you through the difficult times as well as the bumper years. It’s much easier to fine-tune a financial plan that already exists, rather than start from scratch.
“That calm, sensible, long-term view that advisers give clients is incredibly valuable. The longer you know your adviser, the more you trust them,” says David Corris, Head of the Public Policy Division at SJP.
This lies at the heart of what we mean by financial wellbeing: having a plan is based on what you believe in, and knowing you’ve got an expert on your side to whom you can always turn.
Which means you can lean forward into the future – and embrace it.
The value of an investment with St. James’s Place will be linked directly to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
“He thought he could roll into Ukraine and the world would roll over. Instead, he met a wall of strength he never imagined. He met the Ukrainian people. From President Zelenskiy to every Ukrainian, their fearlessness, their courage, their determination, inspires the world.”
US President Joe Biden on Russia’s invasion of Ukraine in his State of the Union Address last week.
Schroders, TwentyFour Asset Management and BlueBay Asset Management are fund managers for St. James’s Place.
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