Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Investors should turn to ‘traditional’ safe havens amid war in Ukraine
Expert investment consultant Angela Ashton of Evergreen Consultants has flagged a return to traditional asset classes amid the first major armed conflict in many years.
Commenting on Russia’s decision to invade Ukraine, she looks at history as a guide, highlighting that “markets often sell-off in the lead up to an armed conflict but tend to recover strongly once war has commenced.”
Obviously, this really depends on the action that is taken by the US, Ukraine and the likes of NATO, which clearly has little appetite to join any armed combat. Ashton is concerned about the fact that this uncertainty is coming at a time of “concurrent inflation and volatility” which means there is a risk that it does not play out like a “typical wartime recovery.”
Long-held diversifiers, which have been out of favour for several years, are suggested as the best options to protect portfolios, with gold, long-duration bonds and cash the preferred options. Their risk profile and liquidity is well-known, and hence, can likely be trusted.
The challenging economic conditions already in place mean that market outcomes may be “less satisfactory if the conflict cannot be contained.” warning that the risk of a policy error by central banks is significant and real.
The best-case scenario, according to Ashton, “is that any conflict and sanctions are short-lived and energy prices retreat to levels that do not add further impetus to rising consumer and producer prices. This will reduce the risk of a policy error and potential for an economic and market malaise,” she says.
