Stocks fell last week for the second time in a row as tensions between Russia and Ukraine escalated.
www.ft.com/content/50ce3f10-d911-461d-9dac-12ffb94f203e
Some are now saying there is an 80% chance Russia will attack.
macro-ops.com/a-russia-ukraine-psa/
The likely immediate consequences of an attack would be higher oil and other commodity prices, and lower stock prices.
www.marketwatch.com/story/what-the-threat-of-a-russian-invasion-of-ukraine-means-for-markets-11645271356
However, most equity analysts agree that the impact of an attack should prove fleeting.
As Alex Barrow of Macro Ops puts it: “The public has a tendency to overweight the market importance of geopolitical events. The truth is that the vast majority of the time, these things don’t really matter except for a very short while.”
Russia represents only 2% of world GDP. And as Hamish McRae argues in The Independent, an invasion is likely to last for only a few weeks. After that, investors will go back to worrying about inflation. www.independent.co.uk/independentpremium/voices/russia-ukraine-sanctions-investors-economy-b2019261.html
McRae makes the interesting point that an invasion may make central banks more cautious about raising interest rates. That could be positive for the markets over the next few months.
In the short run, though, markets may well fall further, since although individual investors and investment advisors are already pessimistic,
www.yardeni.com/pub/peacockbullbear.pdf
other tactical indicators such as the CBOE Equity Put/Call ratio do not yet show excessive pessimism. The market correction this year has been orderly and mild by historical standards, so people have not yet become properly fearful, and more bad headlines about the war could entice them to sell.
Ours is not a market-timing strategy, so we will not be trying to time the bottom. The portfolio has no direct Russian or Ukrainian exposure, while medium-term fundamentals continue to be positive for Value stocks. We expect more volatility over the next few weeks, but our strategy only goes to cash if we see existential risks to the world economy, which the conflict does not present at the moment.
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@triangulacapital +3.8%
$SWDA.L -7.5%
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“Investment Mistakes to Avoid: The 2022 Edition”
www.gmo.com/europe/research-library/4q-2021-gmo-quarterly-letter/
– GMO’s Ben Inker presents 4 mistakes that he thinks investors might be tempted to make in the current environment:
#1. Buying past winners ($VUG and $SPX500) and selling past losers ($MCHI and $VWO). #2. Investing in private equity and venture capital, without having any special access to the best managers.
#3. Assuming that assets that performed well during the pandemic carry low fundamental risk. This would apply to $TLT and $XLK .
#4. Assuming future returns will be as high as the returns of the past few years or decade.
