10 Mar 2022
Ukraine and Russia
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
We are surprised that asset prices have not collapsed.
- COVID-19 pandemic then the delta variant and now the omicron variant have led to material supply side shortages of goods causing inflation to spike,
- Russia has declared War on Ukraine and been hit with the biggest economic sanctions in history and
- Jerome Powell Chair of Federal Reserve of the United States has confirmed that they are increasing interest rates by 1% in 2022 staring next week.
So why then have asset prices only corrected which is defined as a 10% fall or more from recent peak instead of crashed which is defined as a 20% fall or more from recent peak.
For example, the Down Jones Industrial Average closed at 33,418 points overnight which is only down 9.2% from its 5 January 2022 high.
All the ingredients are already present for financial market asset prices to crash but we are only at correction levels. Why?
If you know the answer please call or email us.
Looking foward over the next 3 years, inflation is forecast to reduce after peaking this year and GDP (Gross Domestic Product) will slow but is still forecast to be positive.
Click for table.
The investment thinking during times such as this is clear. Don’t speculate, instead remain invested according to your appetite for volatility and when fear and panic take hold, only then react by buying more quality assets at discounted prices.
At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.