Today, it certainly feels like the world is in a very uncertain place. Authoritarian states are flexing their muscles, with the Russian army crossing the Ukrainian border and China’s ongoing subjugation of Hong Kong with the new National Security Law as cases in point.

The West continues to struggle with what is hopefully the back-end of the pandemic as populations build immunity through vaccination and infection.  Economically, the greatest challenge is soaring inflation, hitting levels not seen for several decades.  As a result, interest rates and yields on bonds have started to rise and global equity markets have just fallen a little.  This can all feel very gloomy and unsettling.

It is very ‘human’ to feel that the present is more uncertain than the past.  We all do it. We have all but forgotten the crisis scenarios of events such as the Y2K software bug issues of 2000 (planes expected to fall out of the sky, nuclear power stations to be out of control etc.), the emotional and geopolitical impact of 9/11, or the fear that many felt in 2008 when a meltdown of the financial system was a very real possibility.

The chart below reminds us that over the mid-to-longer term the markets absorb the consequences of such events and power forwards as capitalism drives the relentless pursuit of profit opportunities. Being shaken out of markets based on today’s news is about the worst mistake any long-term investor can make. 

Material global events come around like a revolving door…

What is to be done?

The short answer is ‘not much’. There is nothing that you or we know about the global economy which hasn’t already been considered by the wider market and reflected in today’s prices. For sure, new news will have an influence on those prices, but by its very definition this is a random process that is hard to benefit from unless you own a reliable crystal ball. 

In terms of direct portfolio exposure it is worth noting that Russia represents around 0.35% of global equity markets, and that is before this is diluted down in any portfolio by bond holdings. To put this in perspective, the global market weight of Apple is over 4%! In fact, Apple’s cash reserves alone broadly equivalent to Russia’s entire market capitalisation.

No-one has any real idea as to the wider impact of a Russian invasion, and even if markets fall, you need to ask yourself the following:

  • Do you understand that equity markets can go down – sometimes materially – as part of their journey to delivering positive longer-term returns after inflation? If this is a surprise to you, then we need to talk. 
  • Have your financial and personal circumstances changed recently to such an extent that you need immediate liquidity from your equity positions? This is most unlikely but again, please speak to us if this is the case. Feeling uncertain about markets is not a valid reason for seeking to get out of markets.
  • Do you remember that our high quality bonds provide several valuable attributes? They provide more stable values, supporting a portfolio against equity market falls; liquidity to meet any liabilities without having to sell equities when they are down; and the available capital to rebalance the portfolio and buy more equities when they have fallen to get the portfolio back up to the right level of risk. This is a very important part of risk management. Speak to your lead planner if you would like to better understand how holding high quality bonds offers you stability. 


A constant message from us; “try not to look at the news too much”.

The news can feel unsettling and is increasingly full of sensationalist speculation and exaggeration. Instead, perhaps take a look at a news site that tries to balance the regular media with positive stories which tend to be underreported. Here’s one of our favourites: LINK  



Risk warnings

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product.  Information contained has been obtained from sources believed to be reliable but is not guaranteed.  

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.