Spencer Maynard Wealth Management No Comments

Diplomatic efforts have failed to deescalate the dangerous situation unfolding in Ukraine. Our thoughts are with the Ukrainian people and all those impacted by this tragedy.

The situation is clearly impacting global markets which we completely appreciate is unsettling for our investors. This brief market update is designed to provide some context to the recent developments and draw comparisons to previous geopolitical crisis.

Despite multiple and sometimes seemingly uncoordinated efforts by Western powers to avert armed conflict in Ukraine through diplomatic means, the crisis clearly worsened recently as Vladimir Putin ordered Russian troops to enter eastern Ukraine. This action, described by the President in a television broadcast to the Russian people as a peacekeeping operation, followed the ‘recognition’ of the breakaway regions of Donetsk and Luhansk as independent states. This morning Putin has authorised military operations which now look akin to a full-scale invasion of Ukraine.

We simply don’t know and we certainly claim no geopolitical expertise. Different courses from here could clearly give rise to a wide array of outcomes in financial markets, both in terms of magnitude and longevity. Every geopolitical crisis is different of course but over the last seventy years or so the impact on financial markets of events such as Iraq’s invasion of Kuwait and the Cuban missile crisis has generally been contained and fairly short-lived. We do know, however, that Western powers have all but ruled out direct military involvement, preferring instead to pursue punitive sanctions against Russia. Given Russia’s importance as a producer of commodities, it seems probable that energy prices would rise further if the conflict escalates and sanctions are imposed. This would come at a time when oil and gas prices are already at or close to historical highs and, in the short term at least, this would exacerbate the cost-of-living squeeze in the UK and elsewhere.  With global sanctions due to be imposed, we all hope that the Russians see the potential economic damage and that the diplomats find a way through the present crisis as they did in 1962 during the Cuban Missile Crisis.

We continue to favour high quality investment funds with wide economic moats that we believe will continue to outperform over the long-term. Whilst they may have sold off over the short term, market fundamentals remain strong and buying opportunities exist for quality, active managers.

Leave a Reply

Your email address will not be published. Required fields are marked *