Russia-Ukraine crisis: What this means for you
We are all saddened by events in Ukraine and although we are talking about the impact on markets here, we acknowledge that first and foremost this is a human crisis which is going to impact on millions of people.
The Russia-Ukraine crisis is unfolding at a rapid pace and after months of denying an attack, Russia’s president Vladimir Putin announced on Thursday a “special military operation” aimed at “demilitarisation” and “denazification” of Ukraine, and protection for pro-Russian Ukrainian separatists.
As the conflict escalates, analysis turns to the scale of Russia’s ambition, both within Ukraine and, potentially, the wider region.
What does this mean for the economy?
Russia’s attack on Ukraine has implications for the global economy. Russia is a major supplier of oil and natural gas, to Europe in particular. European natural gas prices could rise back towards their December 2021 peak, given gas stocks are already very low. And, in the hours since the invasion, oil prices have jumped to over $100 a barrel. However, the consensus of opinion is that this increase may not last if other large oil producers decide to increase supply.
Meanwhile, the prices of some metals (like aluminium) and agricultural commodities (like wheat) could also rise, as Russia and Ukraine are major producers.
One consequence of higher commodity prices could be to further increase to global inflation, which is already a concern for many. That in turn could put more pressure on central banks to raise interest rates, though that remains to be seen, this being imported inflation.
Longer-term consequences
Regardless of how exactly the current crisis plays out, there may be long-term consequences. The crisis may hasten ‘decoupling’ (a reduction in economic and trade links) between Russia and the US. At the same time, the European Union is likely to face pressure to reduce its energy dependence on – and cooperation with – Moscow.
What does this mean for your investments?
The coming weeks could see continuing volatility in worldwide markets. It can be painful to see fluctuations in your investments but history shows that sitting tight and looking to the long term nearly always proves better for investment returns.
As you know we are not investment managers, that we leave to the fund managers and fund management groups who your and our money is invested with and we are confident that they have full oversight of these investments and will continue to take action as required.
Indeed, I know from speaking with a few fund managers recently that they’ve been using these declining markets as an opportunity to buy those companies whose share prices have similarly fallen, fund managers recognising that these remain strong businesses in their respective sectors, with good cash reserves, market competitiveness, quality products or services and good management teams.