To the uncertainty resulting from the war was added concern about the lack of energy supplies. Russia is one of the main exporters of energy – it produces 11% of oil, 14% of coal and 25% of natural gas in the world – so the conflict raised concerns about disruptions in energy supply. This pushed up the price of these commodities, which reached new historical values in less than a month. Thus WTI oil has been posting a 67% rise so far this yearits highest price since 2008, which further harms the context of inflationary pressure that has been plaguing the world.
In addition to this, the measures taken against the country of Vladimir Putin led to shake the markets even more given the effects that these could have at a global level. Among the sanctions, the freezing of accounts of both financial entities and Russian individuals, the limitation of exports and the prohibition of imports of Russian energy – the latter only taken by the United States – stood out. The objective of these measures was to try to stop Russian financing in order to dissuade the country from continuing with the war. This led to a more than 30% drop in the Russian ruble and the closure of its financial markets after plummeting more than 25%.
This context generated aflight to quality” that caused investors to migrate due to a greater aversion to risk, which further deepened the fall in the equity sector. The main North American index, the S&P 500, has already fallen by 10% so far this year while the Nasdaq, the largest technological index, has fallen by 15.8%.
The best and worst investments amid the Russia-Ukraine conflict
At Cohen we believe that the greatest risk in the medium term will be that of stagflation. The effects of the war will push inflation even higher, which, added to the rate hike by the FED, will conclude in a period of economic slowdown. However, we believe that there will be both assets and sectors that stand out in this context.
In terms of portfolio, we prefer commodity producers such as the energy sectordespite the fact that he has already accumulated a large raise, which can be acquired through the yield which represents the ETF XLE.
However, we also recommend areas far from the conflict, such as some Latin American companies that are already benefiting from the rise in prices of both energy and the agricultural sector.
The TIPSWhat are they fixed income instruments indexed to US inflationare also another hedging option in the face of higher inflationary pressure.
On the contrary, the most cyclical sectors such as consumer discretionary will be the most affected in the coming months.
Strategist at Cohen Aliados Financieros.
Source: Ambito
