Investors have already been treated to a rocky start to 2022, largely due to inflationary concerns and anticipation that interest rates will be raised numerous times this year.
Plus, as you might already have read or seen the news - on 24 February 2022, the Russia-Ukraine tension escalated into an invasion by Russia into Ukraine, ushering in new waves of fear and worry, just as markets are grappling with news of inflation and interest rate hikes – a double whammy. This has led to bouts of market volatility and even claims of an impending all-out war.
With a geopolitical conflict added to the equation, you may ask what’s next?
Our investment team has put together some information which I think will be helpful in answering some questions you may have.
Should investors be concerned?
There is every reason for an investor to be fearful that doomsday is just around the corner, if one were to only look at news headlines and recent market performance.
In fact, the first response to the invasion was scary for many people. However, investors were pleasantly surprised as markets turned out just fine as they woke up the next morning. If history has taught us anything, it is that market declines are just temporary knee-jerk reactions that are part and parcel of investing.
Looking back at past geopolitical events, equities on average have delivered returns of 8.6% 12-months later (please see table below).
What does this mean for investors?
While it pays to be patient in such tumultuous situations, we should expect and brace for volatility moving forward.
Here are 3 things you can do when markets decline:
Market declines are the best times for investors to discover their true risk profile, and find out what they are comfortable with.
Make sure you are invested in areas with good fundamentals and with a margin of safety. These investments are good to hold through volatile periods.
If you are prepared - good. Sit back and let your money compound over the long-term.
At the end of the day, the fact is that markets do recover after such geopolitical events. For those who have been waiting patiently on the sidelines, this may be a window of opportunity for you.
We hope this has been helpful.
➡️ If you are still unsure of what to do or how to re-evaluate your investment, feel free to reach out for a chat.