Market Volatility Update

By Jade Shelton

We understand that you may be concerned about the current state of the market given the recent events between Russia & Ukraine

The markets are reacting to uncertainty of the current situation with volatility. This is what we would expect.

The markets will typically treat bad news and good news the same – by amending prices to reflect the news. Uncertainty, however, creates volatility in the market. The market is unable to know what to do with prices, so they fluctuate, often wildly. Until there is a consensus, the markets will remain volatile.

These unexpected events happen fairly regularly. In March 2020 the stock market fell over 30% in a couple of weeks. This was widely reported in the media. The subsequent recovery was barely mentioned. By the end of 2020 the market had recovered to finish the year over 3% higher than it started.

Stock market fluctuations create a temporary loss in the value of assets. Only investor behaviour creates a permanent loss (by selling).

We have discussed the mix of equities and fixed income (red line and blue line) during our annual refine meetings. We have looked at the worst-case scenarios (colourful virtual risk table) to prepare ourselves for times like these.

Our suggestion now would be to sit tight and let the market do what it does best: reward the patient and punish everyone else.