2022 so far has not been a smooth ride for investment portfolios initially with corrections across the board caused by an increase in inflation and the reactive measures by central banks.
Early on during the covid pandemic central banks across the world aggressively cut interest rates and expanded asset purchasing programmes (i.e. quantitative easing) to soften the economic damage caused by rising social restrictions. Accompanied by vast cash injections to assist economic packages targeted at helping individuals and businesses, for example furlough packages and business grants.
As the success of vaccine roll outs has strengthened, economies have emerged from their lockdowns and people have begun to resume their normal lives. As a result, economic activity has begun to pick back up. However increasing demand has meant that key materials have become more expensive, and now with oil prices soaring even before this morning’s dreadful news coming out of Ukraine.
This increase in inflation has caused central banks to take measures which will have affected portfolio’s across the board in both equities and bonds which you may have seen.
As you will be aware now the breaking news over night which we all hoped would not come to fruition has caused more uncertainty and turbulence in the markets.
We all hoped this would not happen, not just because of the impact on the markets and portfolios, but because of the humanitarian crisis which may evolve with loss of lives on both sides of the conflict and vast upheaval of families.
As is always the case when we face uncertainty in the markets, thoughts may gather in our minds about possible reactions that we may take to try and come out of the market to shelter ourselves from volatility. Our message has always be consistent, in that the best action to take is to do nothing.
Last week some of you may have seen an article that I shared, which now seems a little understated based on this morning’s news, however the message still rings true, in that leaving the market in times of a downturn could result in you missing out on some significant gains when the markets do recover.
Ukraine-Russia Conflict – Don’t Let Russia Invade Your Investment Portfolio (02.22) (4)
You will have seen a prime example of this immediately after the covid pandemic arrived in 2020. Volatility is the price we pay in order to gain long term returns over risk free options, and although it may feel uncomfortable, history has told us that the most effective strategy is to not make knee jerk reactions.
As always here at Oliver Asset Management are door is always open and we are happy to discuss any concerns that you may have in terms of your personal plans, and we encourage you to get in contact if you want to have a chat at any time.