Investing During Periods of Volatility.

As you will be aware, we follow a strategy of investing during periods of volatility and consolidating gains when investment returns have been strong. By taking advantage of cheaper valuations, it is possible to achieve greater investment returns over the long term. This is particularly relevant for growth assets such as stocks and shares (equities).

The Coronavirus pandemic interrupted a strong global equity rally and volatility returned in 2019. Since then, we have been able to add to client portfolios periodically as markets fell and valuations improved. 

Market volatility returned again this week as Russia ordered its troops into neighbouring Ukraine. Fighting continues and many lives have already been lost. Meanwhile, countries around the world have come together to condemn Russia and support Ukraine.

Considering Possible Repercussions.

Support has come in the form of military equipment and humanitarian aid, however, it is unlikely that foreign troops will engage with the Russian military for fear of escalating the conflict.

It is, perhaps, the combined action against Russia that will have more of a bearing on the eventual outcome. Sanctions have been imposed against the country, its leaders and the business community which are designed to cause maximum disruption. Banning Russia from the global banking system, freezing assets and damaging Russian banks and companies are all designed to put pressure on the Kremlin, however, there are possible repercussions.

Many European countries rely on Russian Oil and Gas, without which their economies would be seriously affected. Russia is also able to launch a cyber war which could disrupt western governments and companies. The possibility of the Russian President taking retaliatory action against western Europe remains a distinct possibility and this could cause considerable economic and financial disruption to the continent. Also, many global companies such as BP, Shell, Apple and Ford have taken action to stop dealing with Russia and this will impact on their profitability.

Waiting For Clarity.

Whilst I remain optimistic and believe that a solution will be found, the immediate future looks very uncertain. Given the current circumstances, I do not recommend that we take advantage of volatility at this time, by adding to portfolio`s, but wait until the situation becomes much clearer. Existing investments should continue to be held, as they were purchased at attractive valuations and will continue to benefit from the eventual economic recovery.

In any event, we will continue to monitor markets and investments and advise accordingly. Should you wish to discuss the recent developments or any other issues, please don’t hesitate to contact me.

Kind regards, Tony.