What’s been happening?
Tensions might be easing on the surface somewhat but they’re still high on the Ukraine border after a week when politicians talked, but the tanks kept rolling.
For investors, this all feels a bit familiar though.
Russia’s grievances about NATO’s eastern creep and supposed broken cold war promises have resulted in conflict twice in recent memory: South Ossetia, Georgia in 2008 and Crimea, Ukraine in 2014.
We don’t want to play down geopolitical events, they can have huge consequences for peoples’ lives. But when it comes to stock markets, frankly, they tend not to matter in the long term.
Commentators love a narrative to explain short-term stock market moves, it’s their job after all. But narratives die as fast as they are born and the market, more often than not, loses interest.
Brent crude oil price
Source: Koyfin, 15 Feb 2022.
Of course, things could always get ugly and a major conflict would be damaging for market sentiment. But investors need to keep two things in mind at this point.
One is the cold hard fact that stock markets are made up of individual companies. And their stock prices, in the long run, are determined mostly by their profit growth.
Ask yourself whether you think the Ukraine situation will be damaging for Apple’s
iPhone sales or Microsoft's
cloud business for example.
Secondly, there is a lot of focus on oil. Russia is a member of OPEC+ and a reasonably important player in the global energy markets. But commodity prices are set by the laws of supply and demand.
Where demand goes, supply usually follows, and prices tend not to go in one direction for too long.
Just take a look at the oil price chart and spot where the Crimea war broke out.
Let's hope calm heads prevail, but unless we see a major escalation in the situation, we have a sneaking suspicion market commentators and investors will soon be moving onto the next set of headlines, whatever those may be.
Past performance is not a reliable indicator of future returns.
Source: Koyfin, as at 15 Feb 2022. Basis: bid-bid in local currency terms with income reinvested.