Sanctions have already been introduced on Russian businesses and persons, but further sanctions seem plausible and forced divestment of Russian assets is certainly not impossible. We hold no direct exposure to Russia and will not buy any.
Globally equity and fixed income markets had already been unsettled by the prospect of more restrictive economic policies, and geo-political tensions have added to the volatility in asset prices. This is likely to persist until tensions ease.
Despite the increases in oil prices and the cost of living, we believe that policymakers will not wish to tip the already Covid-weakened, global economy into recession. Russia’s actions may cause central banks to become less hawkish, which might ease the volatility of asset prices, but for the time being we expect volatility to persist.
Nevertheless, our base case scenario remains that global growth will decelerate following the recent moves higher in commodity prices and central bank interest rates.
We retain our belief that owning well-financed, well-governed assets for the long term is in the interests of all investors. Where possible, we may look to buy shares which have been unduly punished by the short-term choices of others.