The war in Ukraine has sunk markets, and these
developments will have a lasting impact on the investment landscape. For this
reason, you need to protect your savings.
Here's what the most likely scenario is, and how to
protect your investments.
First in the short term, the prospect of rising
energy and agricultural commodity prices could cause additional stagflation
risks for economies around the world.
The first rule in this case is definitely: "Do
not panic, do not divest" .
In fact, one must never let oneself be guided by
emotionality.
Divesting during market turmoil is a surefire way
to crystallize losses. This can also cause a slowdown in the recovery which is
actually the most important part of any economic downturn.
In fact, in the last 20 years, after every sharp
decline, including that dictated by Covid-19, the markets have recovered
rapidly.
Obviously, however, past performance is no
guarantee of future returns and we cannot be sure of a timely recovery, despite
historical precedents. Regardless, the best course of action is not to change
investments, maintain confidence and wait for a recovery to give your portfolio
the best growth potential.
What seems certain is that a continuation of
volatility is to be expected .
How to beat
volatility:
Indeed, this is a key feature of markets in the
early or early stages of a conflict and is due to the uncertainty of the
political and economic climate that precedes the explosion.
An excellent approach to beat volatility and to
optimize the good that the different markets have over time is an adequate
diversification of the instruments used.
Portfolio diversification allows you to protect
your capital as much as possible, to maximize growth in relation to the risks
to which it is exposed. Click here to learn more.
Analyzing investments, according to John
Labunski, safe havens (US equities, Japan, Swiss market,
Health Care, Consumer Staples) and those sensitive to oil (UK, energy sector)
should outperform, while cyclical sectors and Europe ex- UK should face a more
complicated period.
As regards monetary policy, on the other hand, no
major changes are expected in the medium term except for greater flexibility.
Furthermore, the ECB will be concerned with
preserving growth, and therefore decisions on rates could be deferred.
In this context, it is crucial to remain selective
and focus on high quality earnings with good visibility - asymmetric exposures
via hedge funds and options strategies should help mitigate risk. Click here to
learn more.
What is happening in the world of finance?
The war acted as a catalyst, causing stocks to
plummet, while safe-haven assets such as gold and silver rose.
Is it worth
buying gold even if it is on the rise, like right now?
Yes. Because it creates peace of mind due to the
overall balance of the portfolio. The important thing is not to overdo it and
have a strategy based on diversification.
Usually in these situations some more farsighted
operator returns to buy and little by little the prices begin to rise, although
probably not as quickly as it happened with Covid-19.
What happens
to the markets after a war?
Unfortunately, conflicts represent a strong
opportunity for financial growth, and in fact they are often implemented with
this goal as well. Just think of the arms market. Or the subsequent need to
rebuild infrastructure. This is demonstrated by the case of the United States,
which came out of the Great Depression "thanks" to the Second World
War. Because the moments of maximum pessimism are the best to buy.
So how do I protect my savings? Recommended:
·
Maintain a diversified portfolio
·
Use commodities as a geopolitical cover
·
Positioning for the strength of the US dollar
·
Don't be guided by emotionality
·
Don't make hasty choices
Conclusion:
This type of decision must be made rationally
otherwise the risk is to worsen the situation.
If you think it's time to do an in-depth analysis
of your situation to find the right solutions for your specific needs, ask for
advice.
As a John
Labunski Dallas Financial Advisor, I will help you analyze your situation with a
personalized check-up.
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