Hugh Lambert No Comments

Just wanted to share a blog on the Russian invasion of the Ukraine, from an investment point of view.

This comes a very distant second to what the Ukrainian people are enduring with remarkable courage.

When the invasion started last week, there was a pretty sharp drop in the stock markets across Europe. They were down up to 5% during the day, and there was a small recovery the following day, but I’d expect that sort of volatility over the the near term until investors get an idea of how long the conflict might last, or whether it’s going to broaden out.

Historically after conflict gets resolved, there is a a pretty quick recovery in the investment markets over a number of months, on occasion that has stretched out further.

From an economic point of view, the Russian and Ukraine economies combined to about 2% of the global economy, so the conflicts and the impact on their economy shouldn’t be enough to impact the global economy. They are resource rich countries so they export a lot of fuels and commodities.

So any sort of disruption to that (exports) will likely cause inflation. As an example, Russia pipes 40% of the EU’s gas into the EU, so if they were going to limit supply, that’s going to push up the price of gas in EU or may lead to a shortage. If there’s any sort of issue with supply will see an increase in the cost which will push fuel/commodity up into an inflationary situation.

What that means for consumers is higher fuel prices pump, higher shopping bills or heating bills, and certainly for the short term.

The invasion will also create uncertainty and instability in the EU and Western world.

I think that’ll feed into business and consumer confidence and will just mean that businesses and consumers hold off on making big investment decisions until they get an idea of whether it’s going to be stability anytime soon.

And that’s something that’s going to likely slow down the global economy.

And post COVID and lock down, a lot of the money that’s built on the sideline, particularly from a consumer point of view.

Consumer savings were expected to help drive the recovery, but that money is probably going to sit on the sidelines and for a little while longer.

For long term investors, I think it’s going to be very difficult to try and time this, with no sight of how long this could go one or what the intentions are of the Russian military. So to try to figure that out and try to time in and time out it’s going to be hard to do for investors.

For long term investors it’s a matter of riding out the storm.

Looking historically the stock market has recovered quickly.

Given the percentage of the overall global economy, the conflict isn’t going to take a major effect on that side of things.

So I think it’s a matter of remaining invested for long term investors.

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