Tag Archives: Ukraine invasion

How Investors can respond to Ukraine Invasion

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By Sa’ad Rana, Senior Associate – ETF Online Distribution, BMO ETFs

(Sponsor Blog)

It has been almost two months since Russia invaded Ukraine. During this time, we have been witnessing the dramatic impact the war has had on global markets and economies. There is also concern with how these events will impact our portfolios and investments. 

Economic Impact

Inflation numbers are expected to continue rising higher and this war will put more upward pressure on inflation. Russia is a large global oil exporter. Increased sanctions on Russia will undoubtedly cause a supply squeeze in the oil market, which will lead to higher oil prices. In addition, Russia and Ukraine both account for about 25% of total wheat exports, which will now be limited. This can drive up food costs on a global scale. The war will also continue to restrict supply chains. For example, planes are being diverted because Russian air space is closed to more than 35 countries. Having to go around Russia leads to longer travel, resulting in increased fuel consumption and trip costs.  Continue Reading…

Investing during Wartime: How does the Geopolitical Climate impact your Financial Planning?

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By Steve Lowrie, CFA

Special to the Financial Independence Hub

Don’t let Geopolitical Strife destroy your Investment Resolve.

This month, I was planning to write about financial planning for small- to mid-size business owners, including ways to optimize your personal and corporate tax planning. I believe many of you will find the information useful, so I promise to publish that soon.

But not now. Not after Putin invaded Ukraine. It feels wrong to go about business as usual while most of us are asking important questions about this geopolitical crisis.

By no means do our financial concerns detract from the greater, human toll. That said, if I can help you remain resolute as the world justifiably severs Russia’s access to capital markets and the global economy, perhaps we can both do our part to restore justice in Ukraine.

So, let’s talk about geopolitics and investing during wartime. Here are my key takeaways:

Big picture, geopolitical events’ impact on financial markets are usually short-lived

To help you keep your financial wits about you, consider Vanguard’s historical perspective on how the U.S. stock market has responded to other geopolitical crises over the past six decades. As Vanguard’s chart depicts in the article Ukraine and the Changing market environment, the turmoil has typically translated into initial sell-offs. But markets have also exhibited remarkable resilience, delivering returns in line with long-term averages as soon as six months later. That’s not to predict the same outcome this time, but it reinforces the wisdom of betting for vs. against the market’s staying powers.

Credit: Vanguard – Ukraine and the changing market environment

In Vanguard Canada’s recent article, When the markets seem to turn against you, Greg Davis, Chief Investment Officer recommends a steadfast approach:

“A new dimension of risk has entered the financial markets with heightened tensions in Ukraine …

We know this, however, about equity markets in the context of geopolitical risks: they’ve been resilient, much as markets have always been resilient in the face of various risks. We expect the markets to work themselves out, reaching new heights over time and at varying paces …

So now is not the time to give up your fortitude. Now is the time to take it all in with a deep breath, knowing that this day would come — and knowing that it will pass.”

Speaking of predictions, ignore those who claim to know what’s going to happen next

In their landmark studies on political forecasts documented in their book, Superforecasting: The Art and Science of Prediction, Wharton professor Philip Tetlock (a Canadian, by the way) and co-author Dan Gardner found that we’re unlikely to do our net worth any favors by depending on the “expert” predictions you may be seeing on the daily news:

“People who generate better sound bites generate better media ratings, and that is what gets people promoted in the media business. So, there is a bit of a perverse inverse relationship between having the skills that go into being a good forecaster and having the skills that go into being an effective media presence.”

In other words, those forecasts you’re hearing are more likely to sound like sure (often scary) bets, and less likely to be reasoned reflections on the many ways any given event might play out. In fact, evidence suggests, the more certain an expert seems about their forecast, the more skeptical you should be about its worth.

Continue Reading…