The threat of war does not create a positive environment for investors, and so we have seen another big sell-off on global markets. The movements include a 7% drop in Russia’s RTS index and a 1.7% decline in Japan’s Nikkei 225 index.
Investors are very much in risk-off mode, dumping commodity producers – particularly those with exposure to either Russia or Ukraine – as well as tech and travel stocks.
“Russia-focused gold miner Petropavlovsk has fallen 29% in two days on the London market, simply because of where its assets are based. Wizz Air has slumped thanks to its focus on Eastern Europe, and because airlines in general face significant cost pressures thanks to another 3.5% leg-up in the oil price,” says Russ Mould, investment director at AJ Bell.
“Brent Crude was just over one dollar away from hitting $100 a barrel as the market feared disruption to oil supplies.
“The threat of Russia invading Ukraine was clearly visible at the end of 2021, but most investors were more concerned about inflation and how fast interest rates might go up. Now the threat of war is very real, and investors will need to add it to their growing list of things to worry about. This could prompt another bout of panic and lead to heightened market volatility.
“Investment portfolios will likely be reappraised, and investors might increase their weighting to cash for fear of another shock running through equity markets.”