The invasion of Ukraine has shaken the entire European continent, as families, businesses and governments struggle to find certainties in the midst of a growing humanitarian crisis. Global markets, having misinterpreted Putin’s strategy, have unsurprisingly been sent into panic mode.

On Thursday 24 February, Europe woke to the news that Russia’s forces had entered Ukraine from the north, the east and the south of the country following a substantial military build-up on Ukraine’s borders as far back as October 2021. The common assumption – now seen as wishful thinking – was that this growth in troop numbers was a provocative display of strength, which would be followed by a partial wind down a few months later. Similar circumstances played out like this between March and June 2021. However, we know now just how inaccurate those predictions were.

It's no secret that investment markets react to surprises. When a company performs better than expected, its shares will often rise. Conversely, when the global economic outlook suddenly becomes uncertain – as was the case on 24 February – the markets’ default response is to retreat and reconsider. It’s no surprise then that by close of business that day both UK and Eurozone share markets had fallen by more than 3%, with billions wiped off the value of shares in a matter of hours. The following day, these falls were largely reversed, though by this point the headlines had largely moved on to the human impact, rather than simply financial costs.

As this stage, it is still too early to gauge the full impact of sanctions as well as companies withdrawing and divesting from Russian markets. What we do know is that the effects will not only be felt in Russia, and that for long-term investors market gyrations like these will seem much less dramatic – more as ‘noise’ which will play out. The whipsaw changes are instant reactions to the relentless news flow, influenced by short-term traders. For now such moves will feel significant, but on market graphs covering five years or more, they’re almost impossible to spot.

A standard investment caveat is that past performance is not always a guide for the future. This is even more applicable when the investment horizon is measured in years, but the past experience in weeks. It’s certainly tempting to sell out and hope to get back in at the bottom but timing the return is very tricky – almost impossible – and the benefits of long-term investing come from time in the market. If you are a long-term investor with a diversified portfolio, the cliché of ‘Keep calm and carry on’ is as good a maxim as any even in these far from normal times.  

During times of uncertainty, a review of your financial circumstances can be an incredibly helpful exercise. If you’d like to talk this through with a professional, reach out to our team today and we’ll support you in making smart decisions for your financial future.

 


The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.