Investor Update: February 2022 – Ukraine & Investment Outlook

Feb 24, 2022 | Articles, Financial Planning, Investment Management, Savings

Commentary by Payal Trehan, our Senior Investment Strategist on the investment outlook following Russia's military invasion of Ukraine

In the past few hours, it has been confirmed Russia has initiated a major military action in Ukraine. As always, we are carefully assessing the situation, but the past is a great indicator that impulse changes in response to geo-political unrest have rarely been rewarded. As such our focus will continue to remain on the long term fundamentals, which continue to remain attractive.

Russia- Ukraine Impact: What has happened?

After several weeks of rising tension, events on the Russia-Ukraine border have started to boil over. As I write, news stations are reporting that Russia is moving troops into areas of eastern Ukraine that have been under separatist control, whilst Western economies are preparing a first round of sanctions to hit Moscow this week. There is a high probability that by the time you read this, the magnitude of these events would have changed. We are closely monitoring the situation and thought it wise to update you on the impact on our investment strategy ahead.

Investing on a Medium/Long–Term Investment Outlook

Whilst the market will provide several thoughts on how to approach the current situation, the reality remains that it is extremely difficult to forecast geo-political events. Additionally it is important to point out that as markets are forward looking indicators, most of the time the level of bad news is already priced in.
We believe that the current situation may drive investor sentiment and inevitably may be the cause of both upside and downside volatility, with many investors opting to take advantage of any dips to potentially add to their current holdings.

Our investment strategy has always been clear – we invest in fundamentals and aim for long term sustainable growth. As a result, we do not rely on indicators to predict the outcome of short term occurrences in the future. Instead, we have always carefully selected fundamentally sound and diversified holding(s) in line with our clients’ risk & reward profiles. Therefore, discounting the current short term volatility that may be caused by the current geo-political unrest, we believe that continued global economic recovery and growth, decent earnings outlook and confident consumer spending with a high consumer saving index, all point towards strong fundamentals required for long term sustainable growth.

Whilst our thoughts remain with all those affected by this situation on humanitarian grounds, we believe that the actual impact on a medium & long term investment outlook is currently minimal. The major focus on risk to fundamentals will be the continued stress on energy prices, which continue to look sticky on the upside. We foresee further stress on energy prices should Russia aim to restraint supply in response to sanctions. However it must be stressed that this poses an interim threat to Russia’s revenue in the medium term due to lost revenue. Therefore in summing up the entire situation – we do not see the incentives adding up.

Therefore, given the current scenario we do not see any benefit in changing the course of our investment strategy at present and advise our investors to continue to hold the course with a medium to long term view in mind.
History suggests it is seldom a good idea to drastically change a portfolio’s investment strategy in the event of geo-political unrest, and we believe this time is no different.

My sincere regards to everyone,

 

Senior Investment Strategist
Michele Carby Practice – Holborn Assets

 

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