Just as we thought that the post-Covid world was in reach with all the assumptions of a return to a more predictable and secure set of market conditions, a certain Mr Putin attempts to start what could easily become World War 3.
The build up to the confrontation in Ukraine caused elevated levels of volatility over the last few weeks and one thing is certain, in the weeks and months ahead, this uncertainty, as markets respond to the geo-political landscape, will remain. What is surprising however is the amount of unity “in the west” with its huge economic power and its central banks commitment to do anything necessary to reduce the shocks.
As I write today, Russian domestic interest rates have already more than doubled, rising from 9.5% to a whopping 20%. The rouble has also crashed in value from 0.0098 to the £ to 0.0075, a fall of nearly 25%. The Moex (Russian Stock exchange) fell by over 45% at one point and currently sits around 28% down. However well Russia thinks it has prepared to mitigate the effects of this war on its international trading ability, effectively removing huge amounts of spending power from your domestic market (ie: interest rates rising) and hiking the price of imports by 25% will result in a huge economic shock. How long this can be sustained by the politicians against its domestic pressures will remain to be seen. Russia is now likely to become even more of a “pariah state” and it will be a long road back.
How are our investments managed?
Most portfolios have felt the negative effects of current geo-political conditions and markets are and expect to remain extremely volatile for the foreseeable future. Whilst changes are already regularly made to all our investments on an ongoing basis, we do not make what we call “conviction market calls”, ie: short term changes – effectively betting on something happening – (there are people with far more knowledge that us whom still get this spectacularly wrong), so all our views are always long-term views, working with individual clients to match their circumstances to sophisticated long-term strategies. We overlap strategies with high levels of diversification, managing exposure across many asset classes (shares, property, gilts, corporate bonds etc), high levels of regional exposure (UK, Europe, US, Japan etc) and recognised investment techniques such as regular rebalancing and benchmark versus tactical asset allocation.
The providers we use, and ourselves, will continue to manage all portfolios to the best of our abilities, driving out long-term performance to ensure the financial security of our clients. It is simply a very unpredictable time, at present. Over the next 2 weeks, we will be contacting as many clients as possible but as always, in the meantime, don’t hesitate to get in touch with your local experts with any concerns you may have. As advisers, we realise that now more than ever it is important you can access your dedicated expert – at no additional costs whatsoever.