Caution, diversification, selectivity and orientation towards middle term. These are the four key words to decide how to invest during the war between Russia and Ukraine. To suggest it is Alessandro Fugnoli, Kairos strategist, in the latest episode of his monthly podcast “On the fourth floor".
According to the analyst, the conflict poses unknown factors in the face of which, at the moment, it is impossible to comment: on the one hand, the warfare seems to be intensifying, threatening to spread to other countries as well; on the other hand, the negotiations for a ceasefire continue under the radar and it cannot be ruled out that an even more stable agreement will be reached in the coming weeks.
At the same time, however, the United States and the European Union are still working to define the final perimeter of the sanctions against Russia, and it is not clear whether any agreement would lead (at least in the short term) to an easing of the sanctions themselves.
The risk of a new recession
Economically, one of the few certainties is that a protracted war, coupled with the naval blockade of Ukraine, it would hamper supplies of grain and industrial metals globally, fueling the rush of inflation, which was already “dangerously high before the war and would send some emerging economies and perhaps Europe itself into recession – writes Fugnoli – However, there will be no no global recession, because America and China will continue to grow in any case”.
The possibility of a revival of the financial markets
Conversely, if the war were to end relatively quickly, Europe could once again focus without fear on expansionary fiscal policies, also giving new impetus to the financial markets.
How to invest during the war between Russia and Ukraine
Faced with such an uncertain scenario, in which direction should we move on the financial markets? In short: how to invest during the war between Russia and Ukraine? To answer these questions we need to start from a hypothetical scenario: “Ours – explains the Kairos strategist – is that the war will not be long and will not produce a clear victory for one of the parties. Fatigue will leave room for diplomacy”.
Here are Fugnoli's four tips in detail.
1) Be cautious and avoid leverage
"Caution it doesn't mean staying liquid”, warns the expert. The point is not to flee the markets, but "avoid using leverage and integrate the portfolio that existed before February 24, a constructive portfolio oriented towards the recovery of consumption and investment in the economy emerging from the pandemic, with anti-fragile assets that perform well, even in a highly instable environment. We are referring to the dollar, raw materials and gold”.
2) Diversify by looking at Asia and America
Secondly, Fugnoli recommends including "Chinese government bonds in the fixed income part" and "American stocks in Asia and commodity-producing emerging countries in the share part".
3) Selectivity in choosing the safest securities
In the approach to the market, however, it is always good "favor solid debtors and equities with multiple lows – continues the Kairos strategist – at least until the global picture becomes more stable again”. It is true that the best opportunities are found in the worst contexts, "but the worst contexts also produce the definitive exit from the market of many economic subjects", warns Fugnoli.
4) Focus on the medium term
The last tip has two meanings:
- don't get carried away by the alternation of alarming news and positive glimmers that characterizes this phase;
- consider that, after this war, the energy transition it will accelerate, because it will no longer be dictated only by environmental reasons, but also by strategic needs.
