Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

INVESTORS, like everyone else, are attempting to understand the implications of Russia’s invasion of Ukraine. They have moved quickly to reduce risk, heading into safe havens such as gold, commodities and the dollar.

Understanding the impact of fast-changing economic and financial sanctions is a bigger challenge. Hard too is the assessment of how war in Europe might change the previously dominant narrative of rising inflation and higher interest rates.

How have markets reacted?

In some ways, predictably. The gold price is close to $2,000 an ounce. Oil has oscillated either side of $100 a barrel. The dollar is at a recent high. Equity markets have been driven by expectations about sanctions. A sharp rally on Friday reflected hopes that these might be less onerous than feared. But restricting Russia’s access to the SWIFT payments system over the weekend hit sentiment hard on Monday.

In other ways, however, markets have maintained their poise. The yield on 10-year Treasury bonds, a key gauge of sentiment, started last week at just over 2% and ended it at 1.9%. Investors continue to believe that events in Ukraine will not deflect the Federal Reserve from raising interest rates six times this year.

Where things are moving….

Clearly anything with a direct link to Russia is vulnerable. Sberbank, one of Russia’s biggest banks, fell by more than 60% as the news on sanctions intensified. Energy groups Gazprom and Lukoil dropped by more than 50%. The rouble meanwhile is in freefall. At 118 to the dollar at one point, the Russian currency has continued the collapse that has been underway since the annexation of Crimea in 2014 when it stood at less than 40 to the dollar. The Russian central bank has more than doubled interest rates to 20% in response.

And where they are not….

Markets are understandably volatile. But no-one is panicking yet. At around 4,200, the S&P 500 index had fallen on Thursday last week by 15% from its January peak. By the end of the week, however, it was less than 10% lower. A correction but not a rout. Here in the UK, where the market is more influenced by commodities, the retreat has been less than 5%.

Standing back

In the blizzard of news filling the rolling 24-hour news schedules, it can be difficult to think longer term. But some market watchers are asking whether the move into physical commodities this week is part of a longer-term shift and not just a response to an immediate crisis. In 1980, energy and commodity stocks represented 60% of the value of the US stock market and technology just 20%. In 2000, that position had reversed before the bursting of the dot.com bubble sent investors back to hard assets again. Today tech is 40% of the market and commodities just 5%. Perhaps the investment story behind the headlines will once again be a swing in market leadership to things we can touch.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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