Historically, events like conflicts and financial crises have often led investors to take immediate action. As they witness the value of their assets falling in the early days, many investors sell out quickly to try and avoid further losses.
Many industry experts say that doing so can incur unnecessary losses, and that playing the long game is the logical option. However, with much of the world imposing sanctions on Russia and with Russia cutting off the western world in other ways, there are a number of ways in which UK investors are being affected by the Ukraine crisis.
The outlook for Russian imports
The Times reports that the drop in trade with Russia – Britain’s 19th biggest trading partner – could well impact on UK investors and investments. Confirming that the UK’s imports from Russia are three times higher than its exports to Russia, the newspaper suggests that there are two key import sectors that could affect UK investors.
The first is oil and gas. While only a small fraction of the UK’s supply comes from Russia, fuel prices are increasing and sectors that use a great deal of fuel – such as food producers, manufacturers, transport firms and logistics companies – will be affected.
The second is food. Russia and Ukraine, between them, are among the world’s biggest exporters of wheat, other cereals, vegetable oils and sunflower seeds. Fidelity suggests that “the war could impact the production and distribution of these vital commodities”, potentially leading to significant cost increases for consumer goods producers like Unilever, Proctor & Gamble and Nestlé. With increased food and fuel costs likely to be passed onto consumers, this could have a knock on effect on discretionary spending, with consumers forced to spend more just to eat and heat.
What are other investors doing?
Hargreaves Lansdown has spotted two key trends coming from the early days of the Ukraine crisis.
Firstly, they have noticed a shift towards what they call “safer” options – like gold, platinum, silver and bonds – which are more likely to retain their value during times of crisis.
Secondly, they have seen growth investing take a back seat, and value investing come to the fore, stating that “there are signs this trend is set to continue”.
As yet, it is hard to predict how this current conflict will end. But it seems that while some investors are exiting certain markets as soon as they can, others are holding out for the long term, based on historical price moves post-conflict.
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