You will have seen the news this morning of the Russian invasion of Ukraine.
Whilst our thoughts clearly are first with the people of Ukraine and all those directly affected by the violence it will also have an impact on investment markets and naturally our clients might well ask questions about what they should do.
The short answer is ‘nothing’ and the below short paper explains why. History is sadly littered with wars, invasions and terrorist attacks and the natural emotional response is to worry and potentially panic. The paper demonstrates that with the benefit of hindsight these are likely to lead to short term volatility with markets typically rebounding quickly and strongly.
The global economic impact is likely to be small, economies and businesses are robust. Your portfolio is well diversified and run by high quality investment managers.
I hope this is helpful but please speak with your adviser here at Irongate if you have any specific concerns.
Markets recover from crises
A major crisis that causes the stock market to drop in value can be unsettling, but does not spell the end for markets or investment strategies. History has shown that markets bounce back, and that staying invested through volatile episodes lets you benefit from a rebound.
Crisis and recovery: How the S&P 500® Index performed during and after historic events
Historical references do not assume that any prior market behaviour will be duplicated. Past performance does not indicate future results. There are risks associated with mutual fund investing including the possibility that share prices will decline.
The pattern of crisis and recovery
All too often, a crisis can lead to fear as public perceptions become overly pessimistic. Financial markets that are usually rational can behave irrationally. But the U.S. stock market has proven remarkably resilient; it routinely has recovered from short-term crisis events to move higher over longer time periods.
The graph below shows a hypothetical investment in the S&P 500® Index, which represents some of the largest companies in the U.S. stock market from across all sectors of the economy.
By staying invested during crises — or by investing during a crisis to take advantage of stock market valuations — investors can keep their portfolios on track in pursuit of their long-term goals.
This graph represents a hypothetical $10,000 investment in the S&P 500® Index, an unmanaged index of common stock performance.
The value of an investment can go down as well as up. You may get back less than you invested. Past performance is not a reliable guide to future performance.
The opinions expressed are those of Irongate, this material is not a recommendation, or intended to be relied upon as a forecast.
Graphs and excerpts taken from an article by Putnam Investments - 100 Federal Street - Boston, MA 02110 - putnam.com
For informational purposes only. Not an investment recommendation.
All funds involve risk, including the loss of principal.