Reflections on Russia, Ukraine and the Markets

As I sit in Warsaw writing this, a few hours drive from the Ukrainian border, it does feel that the world is in a very uncertain place.

What is not uncertain, is the fact that the response from the people here in Poland to the flood of refugees has been absolutely incredible.

All around, people are using their time, talent and treasure to help; I feel very proud to be able to call this place home.

From an investment perspective (which, frankly, is the only perspective that I am qualified to opine on), in times like this, it is easy to feel that things are even more uncertain than they have ever been before.

However, we only have to look back over events of the past couple of decades to realise that this is not the case.

In that time, we have seen events such as the fear of a Y2K implosion, 9/11 and wars in Iraq and Afghanistan all come and go.

The chart below, which was shared by Alan Smith at Capital Asset Management, shows that over the mid to long term markets absorb the consequences of these events and continue to move forwards.

Russia Ukraine markets
Source: Vanguard Global Stock Index ACC, 4/8/1998 to 14/2/2022 in GBP

I know there can be a temptation to do something, anything, in such times. 

However, changing one’s investment strategy based on current headlines is probably the worst mistake that any long term investor can make.

This chart, shared by Peter Mallouk from Creative Planning, shows what history can tell us about geopolitical events and stock market reactions.

“In the end, the stock market only cares about one thing: the future earnings of companies. The market will look at this crisis and ask itself if companies like McDonald’s, Apple, Nike and Google are likely to make more money a few years from now than they do today. If the answer is yes, the markets will work themselves out.”

Peter Mallouk, CEO at Creative Planning

Finally, it is worth noting that in terms of global equity markets, Russia represents around 0.35%n of the total value.

In fact, the cash reserves of Apple alone are about the same size as the entire value of Russia’s stock market.

Further reading

A Message From Peter Mallouk: Russia, Ukraine and the Markets

Get in touch

Please reach out if you are concerned about your portfolio in light of recent events or if you have any questions.