A changing landscape
The value of investments can go down as well as up and you may not recover the amount of your original investment. Past performance is not an indicator of future performance and should not be relied on as such.
Russia’s invasion of Ukraine has shocked the world and unsettled markets, but the long-term economic outlook has so far remained stable.
The terrible scenes on the news of those affected by Russia’s invasion of Ukraine have been unsettling for people around the world.
And while the tragic human cost of the invasion continues to dominate our thoughts, recent events have rattled markets too. But the economic impact may be more limited.
“We expect conditions to improve”
Stock markets reacted fast following the invasion, falling by up to 4 per cent in the immediate aftermath.
The oil price had at one point risen to well over $100 a barrel, reaching a 14-year high, while government bonds (government issued debt) rose as investors flocked to the relative security they can provide.
But the long-term economic outlook was holding up following the invasion, showing the potential value in staying invested through more turbulent times and awaiting a recovery.
Sven Balzer is Head of Investment Strategy at Coutts, the bank that manages your Royal Bank Invest fund. He said: “The Ukraine invasion, Covid and inflation have all proved challenging for investors, and that will continue for the time being.
“But as the year moves on we expect conditions to improve and, ultimately, central banks and governments will step in to avoid a severe slowdown of economies.”
Monique Wong, also from the Coutts team, added: “We believe in remaining resilient and not being overly reactive to media headlines. Investing, ultimately, is about the long term.”
“We believe in remaining resilient and not being overly reactive to media headlines. Investing, ultimately, is about the long term.”
Coutts Investment Team
Inflation: what goes up should eventually come down
UK inflation climbed to 6,2% in the year to February, its highest level in 30 years, as food, fuel and energy costs rise.
Some forecasts say UK inflation could peak at around 8% in April given the extra pressure from higher energy prices. The experts at Coutts believe it will begin to fall in the second half of the year, but it may drop a little slower than expected.
Monique said that high oil prices were effectively “a tax on the consumer”.
“They can slow economic growth and lower demand for goods and services as people find themselves with less disposable income,” she said. “This, in turn, should lower inflation over the longer term.”
*Based on Consumer Prices Index data from the Office for National Statistics for the 12 months to February 2022.
Managing your money for the future
Coutts has very limited exposure to Russian assets of around 0.1%, and they’re looking to bring that down to zero.
Before the invasion the team had already made investment changes elsewhere to reflect market conditions, which include:
- selling European stocks, which were already starting to look less attractive
- buying more US stocks, which helped performance as America’s economy has been relatively unscathed by Russia’s actions
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