Given what markets have had to contend with, it already feels like it’s been a long year (despite it only being February). And now, this.
Putin has upped the ante with his talk of nuclear weapons. This has been described as the biggest European invasion since WWII. Naturally, headlines such as this cause market jitters with stock markets around the world responding accordingly. In the absence of a comprehensive peace deal, energy rationing on heavy industry in Europe could become a reality sooner rather than later, given Europe’s reliance on Russian gas and oil supplies. Thus, the collateral damage could extend further than short-term volatility in financial markets.
Having said this, these events could potentially give markets the perfect breather – particularly given the stretched US valuations in big tech. Should this happen, it will not only provide a solid underpin for future investor returns (which our managers will be looking to take full advantage of as they have done suitably in the past). This could also potentially provide very lucrative investment opportunities for those investors who follow our advice and steel themselves against the market noise.
A prime example of this was what occurred as recently as 2020 when everyone briefly believed that society as we know it was coming to an end, markets sold off sharply. Thankfully our managers utilised the opportunity to buy back in (both into equities and bonds) at close to market bottoms, rewarding investors very attractively in the ensuing months.
Whereas market turmoil and political tragedy are never pleasant to behold, they sadly also present some of the best opportunities for astute investors to increase long-term wealth, as crude as that unfortunately sounds.
The Bottom Line
Markets are continuously climbing a wall of worry. And when the Russia – Ukraine conflict is firmly in the rear-view mirror, there will be another uncertainty that markets have to endure, and another after that.
As the uncertainty subsides, the focus will once again turn to what matters. Remember, equity markets are driven by sentiment in the short term and earnings growth in the long term. We have been here many times before, and know that the best course of action right now is the active decision to do nothing and remain invested.