The investment implications of the Ukraine invasion
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.
During a Royal Bank Premier event, two of Coutts’ leading investment experts provided insight into the potential economic impact of the Russian invasion of Ukraine and what it could mean for investors.
As Russia’s invasion enters its second week we’re no nearer to knowing how these tragic events will end, and the uncertainty is still felt within financial markets. But staying focused on the long term could be the right approach from an investment perspective, according to two of the experts behind the Royal Bank Invest funds.
Monique Wong, Senior Portfolio Manager, and Chief Investment Officer Alan Higgins, both work at Coutts, the bank that runs the funds behind our online platform.
They spoke to Royal Bank Premier clients and took their questions at a recent event on the latest developments in Ukraine.
Monique said that markets had become “very sentiment driven because they don't know how to price these events”.
She said broad equity market investors had become more cautious in light of recent events, and safe haven assets had benefited. Government bonds, for example, are up as investors move to the relative security they can provide. They have therefore had a stabilising effect on the investment portfolios and funds that include them.
“We bought some UK government bonds earlier in the year because we gauged that the bond market had priced-in too much bad news on inflation and interest rates. It was very contrarian at the time, but it has come good.”
Senior Portfolio Manager, Coutts
Growth despite the volatility
The news coming out of Ukraine makes it easy to forget that economic growth broadly remains in a good place.
“We have had a healthy recovery coming out of the pandemic,” Monique said. “Although there are risks to global economic growth, developed economies are supported by strong labour markets and people having an excess of savings.”
However, inflation, which was going up before the invasion, will see some further upward pressure from rising energy and commodity prices. Interest rates will continue to rise to counter inflation, but they’re now likely to be more modest than what was expected before the invasion.
“Central banks [who decide interest rates] are worried that any substantial rise in interest rates could create a recession.”
Chief Investment Officer, Coutts
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