Ukraine Conflict & Financial Markets Update

I would like to take this opportunity to update you on how the Russian military action in Ukraine has impacted financial markets and the potential effects going forward.

In response to Russia’s invasion many developed nations have imposed sanctions on Russian assets, businesses, and even gone so far as to place restrictions on the functions of the Russian Central Bank.

Whilst the sanctions already imposed are likely to inflict significant strain on the Russian economy, leading to unemployment and high inflation for the Russian people, the small size of the Russian economy means this would not, in itself, have a material impact on the world economy.

However, with Russia being one of the top 3 oil and gas producers in the world, the uncertainty over potential supply disruptions has sent energy prices soaring. At the time of writing the price of Brent Crude oil has risen around 40% in less than two weeks.

Such a rise in energy prices in a short period of time has the potential to slow growth across the world as consumer incomes get squeezed and business profits are trimmed. It is this possibility, and the uncertainty of how deep the crisis will go, which is causing volatility in financial markets.     

The humanitarian cost of this conflict will be higher than the economic cost and whilst we appreciate that it can be unnerving witnessing sharp swings in market sentiment, it is important to take a dispassionate view of your investments.

Just like everyone else we do not know how this conflict will evolve, but we would strongly suggest that remaining invested will prove to be the best course of action. Several studies have shown that crystallising a loss and attempting to wait for a ‘better’ time to invest will often end up in lower returns than simply remaining invested.

As we have seen during previous uncertain episodes, whether that be the start of the COVID pandemic, the US-China trade war or the Eurozone debt crisis, stock markets do overcome large challenges if given enough time.

We hope you find this update useful but should you have any queries on this, or any other matter, please do not hesitate to contact us.

Statement provided by Nigel Foster, Managing Partner