Astra Market Update 14/02/2021
The current geopolitical risk is significantly higher than it has been for decades and this is impacting markets.
Markets have been in correction in recent weeks largely due to interest rate hikes, and certain sectors have seen significant falls. Certain sectors will still perform well even if there is a war and we are currently looking to balance client portfolios to take into account all scenarios.
Diversification is still the key but still important to overweight the sectors likely to benefit in the short term.
In terms of economic importance, Ukraine is not significant so the economic impact to the world would be small. The Russian economy is not significant in terms of size, although it is the worlds third largest oil producer. A war would create equity volatility and an increase in commodity prices. Many would see a drop in Russian equities as a strong buy opportunity.
NATO have already stated they will not put boots on the ground so any conflict is likely to be limited to Ukraine.
No one can guess the way Putin is thin
king but speaking with Fund Managers and Russian colleagues they are of the opinion that war is very unlikely and that this is a diversionary tactic based on what Russia is already doing in Belarus and Kazakhstan.
At Astra we have to consider all the options and apart from events in Ukraine we also think that we need to change the focus of client investments as it appears the world is becoming more open and the impact of Covid lessens.
Inflation is also a serious issue as is the ’stand off’ between the US and China.
Over the next few weeks we will be writing to you with recommended changes to reflect our thoughts as to how to ride out the current volatility yet still generate reasonable returns across all risk profiles.
Themes we are looking at:
Move to funds which are defensive in nature and represent the lower end of the risk spectrum but will also look to generate good growth by using cash when opportunities emerge. These funds will also look to invest in corporate and government debt where opportunities will emerge due to a change in interest rates and rising inflation.
Use of ‘Absolute Funds’ which are not impacted by equity markets and will provide returns similar to cash.
Continued use of ‘Managed Funds’ by the best performing fund managers to generate growth over the next few years.
Look to invest into commodity funds which will likely outperform inflation and are a sector which many fund managers believe will outperform in the next few years.
Geopolitical tensions will also help commodities gain.
Add funds which will benefit from the issues facing China and the US, which will benefit other countries in Asia, Vietnam looks well positioned.
For high risk investors look to have small exposure to Russia as the Russian market is very low representing a great opportunity if the Ukraine crisis is resolved peacefully.
‘Buy on the sound of the cannons, sell on the trumpets’
If you want to discuss the current situation with your Astra Wealth Manager or one of the team please drop us an email.
If you are looking to potentially benefit from this ‘current situation’ and want to discuss high risk opportunities, feel free to also reach out.
The purpose of this email is to let you know we are actively discussing and reviewing current events on a day to day basis to make sure we are best positioned to advice our clients and in particular protect portfolios during these volatile times. If nothing has changed recently with regard to your attitude to risk or when you are looking to take benefits from your investment, you can rest assured your portfolio is already well positioned to withstand these type of current risks in the market.