The Ukraine conflict is real; at the time of writing Russian troops are crossing the border. How it’ll pan out, I don’t know. What I’m more confident about is the impact on all of us in terms of increased market volatility. I’ll try to explain why I believe this is going to happen. Then why I believe we should all pause for breath and try to focus on the long-term.
I’ve covered market volatility in blogs before. Probably will in the future, too. Unless you’re Ukrainian, it’s not a time for drastic action. Let the professional investors take considered views on the markets they operate in every day.
Ukraine Conflict to Bring Yet More Market Volatility
There’s been a lot of turbulence in global markets anyway, prior to conflict in Ukraine. As the world gets back into gear after worldwide lockdowns, it’s yielded economic pressures. Gas prices. Semiconductor (chip) shortages. Transportation price rises. These have been bubbling for some months now and are looking to get worse.
In the UK, we have some additional factors to amplify the global issues. Labour shortages post-Brexit, restricted access to export markets as rules change, wealth inequality, Treasury insistence on further austerity to ’pay for’ COVID-related expenditure, to name but a few.
Then there’s the impact of the Ukraine conflict, which dents confidence. As the world looks less positive, asset prices fall. According to the BBC, stock market indices fell recently in the UK, Japan, China, Germany and the USA, as some investors pulled out of certain sectors.
Russ Mould, investment director at AJ Bell, told the BBC that investors had been dumping shares in commodity producers, “particularly those with exposure to either Russia or Ukraine – as well as tech and travel stocks”.
While the uncertainty over the outcome of events in Ukraine continues, expect more volatility of the downward variety overall.
Confidence is Key
Markets thrive on confidence. Just as they go down in turbulent times such as the Ukraine conflict today, they rise again when the sunny uplands come into view. That’s because investors see more businesses making more profits down the line.
Unless you’re a professional investor with specific sector expertise, it’s probably not a good idea to try and react quickly as events unfold. I leave investment decisions on my behalf to those that do it every day. They can’t be certain of the future, but they’re much better than me at offsetting likely down-turns and capitalising on market turnaround.
Market volatility is normal. See some of my past posts on the subject:
- 4 Reasons I’m Still Optimistic about Stock Markets
- 6 Questions for Times of Global Stock Market Volatility (Part I) and (Part II)
- Why Long Term is Best
Take the Long-Term View
So, as I always say, pause, take a breath and consider the long-term.
Yes, it’s volatile out there and uncertainty dominates our global political future. However, I see no reason not to invest in the stock market in the current economic climate, for the long term.
So if you have a long-term perspective and can accept the fact that markets tend to rise and fall along the way, now is as good a time as any to invest in the stock market.
That was my view in February 2019. It’s still my view now during market volatility surrounding the Ukraine conflict. And boy, hasn’t the world changed around us since then?
For more information or if you have questions about your investments, please contact me without delay.