I could spend my time here writing once again about UK inflation. It was revealed this week that price rises hit a new 30-year high in January, topping the December figure by 0.1 percentage points.
However, there is little to add that I have not covered already. Inflation is here, it is high, and investors need to make a call on whether to make wholesale portfolio changes, stick with what they’ve got, or balance out their approach.
Instead, I would like to focus on another issue that has come to the fore in recent days and threatened to take markets by storm: the potential invasion of Ukraine by Russia.
There was a ramp-up of tensions over the weekend, with the biggest impact felt in Europe and the UK, with the FTSE 100 index down 1.7% on Monday.
Yet on Tuesday, all looked to be in the clear. Eve Maddock-Jones wrote that markets had a “moment of respite from the Russia-Ukraine tensions”, as the former removed troops from the border of the latter.
Since then, US president Joe Biden has weighed in to the fray, claiming that Russian president Vladimir Putin was “looking for an excuse to go in”, causing markets to sell off again on Thursday.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the US administration claimed to have “evidence on the ground” that Russia was moving towards an imminent invasion of Ukraine.
If this is the case there will be bigger issues to worry about than the stock market. However, if the tension persists without turning into a full-scale war, there are some stock market winners and losers. The price of gold, seen as a safe haven in times of crisis, has risen by another 1.4% to $1,896 an ounce, an eight-month high. It could be useful if political tension erupts into conflict.
In terms of losers, equity markets have suffered, with the Euro STOXX index in Europe, FTSE 100 in the UK and S&P 500 in the US all down on the week.
Beleaguered travel stocks, still reeling from the pandemic when planes were grounded and few were allowed to fly, have been hit once again.
On Thursday, British Airways owner International Consolidated Airlines was down by around 4%, while Hungarian airline Wizz Air fell by more than 5% and engine maker Rolls Royce dropped 2.5%. Anything related to Russia has also dropped. Evraz, the Russian miner, was down 7%, the biggest loser on the day.
In the past, however, western stock markets have largely been non-plussed by Russian aggression. While there has been some additional volatility – as was the case during previous flare-ups in 2008 and 2014 –this was not sustained.
Paul Craig, portfolio manager at Quilter Investors, said: “In fact, markets were more responsive to weak company results than wider geopolitical events, as should be expected.”
This time it is slightly different, as any potential sanctions could have a big impact on the energy market, which is already a leading contributor to higher inflation.
The key is not to get distracted by short-term noise, but instead to keep calm and carry on. Even if you are more of a short- to-medium-term investor, corporate earnings and the economic environment are going to be more important for markets than conflict politics.