Investing During Volatile Times

Ancoria Insurance
APRIL 2022
Ancoria Insurance
Investing During Volatile Times

The Russia-Ukraine conflict  caused major turbulence, at a time when the world was trying to recover from the consequences of the pandemic that broke out about two years ago. While the focus is on the loss of human life, there is also a significant impact on the global financial system and global markets with equities and bonds initially plummeting, followed by some recovery by the end of March. Commodity prices soared given that Russia is a key producer of several important commodities and a major energy supplier, covering a big portion of Europe’s energy needs. This contributed to a further surge in inflation and renewed worries that Central Banks world-wide will be forced to end their accommodative monetary policies, sooner than expected. It is unlikely that the crisis will be resolved in the short term. This, coupled with high inflation expectations, is expected to maintain volatility elevated for an extended period. Here are a few points that may help you during such volatile times.

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Market Commentary

Stocks and bonds had a bad first quarter as central bank tightening, high valuations and persistently hot inflation have applied new pressures to the global financial system. The S&P 500 fell almost 5% in Q1, while European and Emerging markets equities lost 9% and 7% respectively. Government bonds came under significant selling pressure as investors priced in an aggressive pace of interest rate rises. The Bloomberg Global Treasuries index fell 6.2% in Q1 and many participants believe there will be more pain going forward. The current military action is raising concerns about the potential impact on financial markets and the real economy as sanction-hit Russia is a major producer and exporter of oil, gas, wheat, metals and fertilizers. The war has brought considerable volatility and uncertainties but it is also creating opportunities for active investors as stock dispersion is currently well above its average since the Great Financial Crisis.

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