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Market Comment: Ukraine and financial markets

What are we talking about? The war of words over Ukraine has escalated and we have woken up to reports that President Putin has ordered Russian troops to cross the Ukrainian border. Russia has been widely condemned by UN nations and heavy sanctions are anticipated as many fear the invasion has begun. Financial markets are reacting, with risky assets selling off. We wanted to share a few thoughts.

What do we think? There are a few points to make here. Most importantly, we’d argue that the message is a familiar one: stay focused on the long-term and remember that diversification (by region and by asset class) can help.

1. Like everyone else, we don’t know how this plays out in the short term. We aren’t reducing risky assets at this point. We don’t think that this will become something that has a significant long-term impact on global financial asset prices, but we’ll continue to monitor the situation.

2. It’s always tempting to try to trade this type of event in the short term. We don’t think that’s very easy to do, and it’s not really part of our investment strategy.

3. There has been, and probably will be, market volatility as a result of this, but we’re seeing some benefits from diversification in our multi-asset portfolios (particularly today) as investors switch into safer assets.

4. We’ll stay with our core investment strategy, and stay focused on the long-term. There’s always the potential for the situation to escalate dramatically, but that’s not our base case currently.

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Written by Richard Flax

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Richard is the Chief Investment Officer at Moneyfarm. He joined the company in 2016. He is responsible for all aspects of portfolio management and portfolio construction. Prior to joining Moneyfarm, Richard worked in London as an equity analyst and portfolio manager at PIMCO and Goldman Sachs Asset Management, and as a fixed income analyst at Fleming Asset Management. Richard began his career in finance in the mid-1990s in the global economics team at Morgan Stanley in New York. He has a BA from Cambridge University in History, an MA from Johns Hopkins University in International Relations and Economics, and an MBA from Columbia University Graduate School of Business. He is a CFA charterholder.

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