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.

THE volatility that has dogged stock markets so far this month has continued into this week. News that Russian troops have been ordered into the two rebel-held areas of eastern Ukraine that Russia recognised as independent entities on Monday has sent further February chills through investors.

These latest developments seem to confirm that Russia is prepared to raise the stakes as it seeks concessions from NATO and the West. It also suggests the threat of sanctions has fallen on deaf ears and that the current crisis may not be over as quickly as we would have hoped for.

Russia is, in any case, under sanctions following the annexation of Crimea in 2014, allegations of Russian involvement in the 2016 US presidential election and the Salisbury poisonings of 2018.

Oil: what will the impact be on UK petrol prices?

The oil price has continued its advance, rising to its highest level since 2014, at around $98 per barrel1. Russia is the world’s second largest producer after the US and this latest rise in the oil price reflects what markets perceive to be an increased threat to global supplies2.

Oil at $100 plus now looks decidedly on the cards. For UK drivers, the bad news is that petrol prices could go up even more, with retailers keen to pass on the increase in wholesale fuel quickly, the pain at the pumps may be set to continue in the coming weeks.

Gas: how vulnerable is UK gas supplies as tensions rise between Russia and Ukraine?

Russia is Europe’s largest supplier of gas. While Britain still gets most of its gas from the North Sea and Norway, any restriction in exports from Russia would likely raise gas prices even further across Europe and in the UK too.

Gold: time to buy the yellow metal?

The gold price is also reflecting the rise in tensions. At almost $1,900 per ounce, it is now close to its highest levels in a year3. Gold has a very long history of holding on to its value through troubled times including in the aftermath of geopolitical shocks. It is also perceived as a hedge against inflation.

Russia-Ukraine crisis: what should investors do?

The latest events in Ukraine and the volatility they have caused in stock markets come as a reminder that it pays to have a diversified investment portfolio that is not too concentrated in any region or type of asset.

It’s worth noting emerging markets funds tend not to have large exposures to Russia, as the country currently accounts for less than 3% of the MSCI Emerging Markets Index that funds often use as a reference.

The Ninety One Global Gold Fund – formerly the Investec Global Gold Fund – features on Fidelity’s Select 50 list of favourite funds. It’s also one of Tom Stevenson’s four Fund Picks for 2022.

This fund invests in a diverse portfolio of gold mining companies worldwide. It also has the flexibility to buy physical gold ETFs and shares in companies that mine for other precious metals.

Yet higher energy prices intensify the prospect inflation is still on a one-way trip this year.

The ASI Global Inflation-Linked Bond Fund, another Select 50 fund, is designed to outperform the Bloomberg World Government Inflation Linked Index (hedged back into pounds). Inflation-linked bonds rise in value during inflationary periods.

As ever, the aim is not to be derailed from participating in the long-term growth potential of stock markets by temporary shifts in sentiment, however unsettling events may seem at the time. Of crises, so the longer-term investment opportunities are born.

Source:
1 Reuters, 22.02.22
2 EIA, 08.04.21
3 kitco, 22.02.22

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. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Due to the greater possibility of default an investment in a corporate bond is generally less secure than an investment in government bonds. The Ninety One Global Gold invests in a relatively small number of companies, so may carry more risk than funds that are more diversified. The ASI Global Inflation-linked Bond Fund uses financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Select 50 is not a personal recommendation to buy or sell a fund. 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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