Holden & Partners Newsbrief: Russia invades Ukraine
Like you, we are watching the unfolding situation in Ukraine with concern. We would like to assure you that we are continuously monitoring events as they affect markets and investments and will update you as necessary. Please get in touch if you have any specific concerns at this time.
The current situation
This morning in the early hours Russian troops launched a full-scale invasion into neighbouring Ukraine. There are reports of missile, artillery, and air attacks of different locations 1 across the country with Russian soldiers clashing with border forces as they entered Ukraine. Putin’s menacing declaration of war promised to demilitarise the country and replace its leaders.
Following a long period of gradual military mobilisation along the Ukrainian/Russian border and failed talks between leaders, events took a further turn for the worse when Putin backed separatists made claim to the Donbas region. NATO and other allies have backed Ukraine’s sovereignty and have offered support in various ways, such as providing military support and equipment for humanitarian purposes.
The sanctions that allies’ place on Russia will also be a very important development to follow. Whether these sections are targeted or follow a more ‘blanket’ approach remains to be seen, however, initial announcements covered banks having their assets frozen, travel bans, and trade restrictions. Further issues will arise from Europe’s overdependency on Russian energy, with the Nord Stream 2 project being halted by Germany’s Chancellor, perhaps prompting big change needed from European policymakers.
Impact on financial markets
The outcome of this invasion is likely to cause worry across many markets. At present we can see that the Russian stock market that has halted trading is down over 35%. The FTSE 100 has opened down and is currently sitting 2.55% below where it closed yesterday. On the other end of the spectrum oil has topped $100 a barrel. It goes without saying the markets will be more volatile as everybody tries to evaluate how this all plays out.
Our approach
We understand that short-term volatility and periods of tension can be uneasy, however, it is important to remember that we take a strategic, long-term view across our investment models. By investing over the long-term the impact of short-term volatility becomes less relevant on portfolio performance.
Although the immediate gut reaction can be to sell and move to cash, timing of markets/investments (and any entry back in) is very difficult, if not impossible, and often in our experience leads to unfavourable results. Therefore, we encourage calmness over this difficult period.
It is worth noting that sudden falls in markets are often followed by very sharp recoveries in value. Our portfolios also include exposure to other assets classes such as bonds and infrastructure which should help to reduce volatility.
Continued focus
We are confident in our long-term philosophy and current positioning, but of course we will continue to monitor these, and other situations, carefully. We will be sure to keep you updated.