Russia-Ukraine Crisis: A Market Outlook

Russia ramped up its all- out assault on Ukraine that commenced Thursday morning, leading to dozens of casualties, tough sanctions from the West, and further unrest around the world.

How did this impact the markets?

We can see that the global markets were generally not impacted by the Russian-Ukraine conflict, with the Russian index being down -30.29% in comparison to the World Index and much of the other major geographical indexes around the world. This is largely due to the relatively small weight Russia holds in the world economy (GDP contributing 1.68% of the world GDP).

However we can see that the commodities market reacted very strongly to this news, due to the MAJOR impact Russia holds over the global commodity market.

What could happen from here?

The bear case would be a extended conflict between Russia and Ukraine, which might result in harsher sanctions on Russia.

I anticipate a more volatile market due to:

1. Lowered risk appetitite due to current negative news.
2. Short-Term uncertainity of the current conflict being resolved
3. Markets taking into account current conflict pushing commodity prices up and sustained inflation that has been the prevailing trend for 2022.

Here is also a summary by IFAST of potential impact amongst major markets.

The stock market has also generally recovered very quickly from man-made geopolitical events like Wars.

What should investors do?

I will definitely hold on to my existing holdings, tune out the current news and ride through the volatility. Such military events tend to have short lived impact on global markets and I remain optimistic with current strong fundamentals for equities globally due to the fading Covid Omicron Variant and robust earnings showings by companies.

For a summary of my 2022 market outlook, you can read it here.

For those who are worried about the potential volatility, we can:

• Diversify the portfolio: Asian markets in general has lesser direct economic exposure, geopolitcal exposure to Russia
• A value tilt in equities: The rising interest rates will continue to be a major theme in 2022.

Here is a list of potential industries to place our limited energy and focus on.

Over the near term, companies with strong economic moats and pricing power will continue to withstand the rising interest rates, while economically-sensitive comapnies like the financial sector will stand to gain from this.

We can see that over the long term, the Technology sector as a whole is still fundamentally a must to be invested in.

• Reduce duration in fixed income.

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Ngooi