An escalation in the war between Russia and Ukraine, following the former’s invasion, has been deemed the biggest medium-term threat to the stock market, according to a survey conducted by Interactive Investor.
Of the 1,792 investors questioned, 42% named the current conflict as the biggest threat, followed by inflation (22.8%) and broad geopolitical tensions (19.5%). As to whether respondents were making any changes currently to their portfolio, nearly half (45.1%) said that they were not, with 21.2% saying they were increasing their exposure to the stock market, and 17.3% saying that they were re-allocating money to more-defensive sectors.
Lee Wild, head of equity strategy for Interactive Investor, said: “The Russian invasion has had a terrible impact on millions of Ukrainians, and the economic consequences are already being felt around the world. The conflict has made investors think hard about where their money is invested.”
He added: “The war in Ukraine is acknowledged not solely as a short-term threat to stock markets, but the biggest threat over the next five years by 42% of respondents. How this change in behaviour manifests itself will only become clear over time, but Europe’s shift away from dependence on Russian gas, oil, and coal will be a running theme long after the bullets stop firing. With billions of euros earmarked for ‘massive investment’ in solar, wind, and hydrogen, it is logical to assume more money will find a home in the renewables sector.”
Across Europe, there has been some rebound on indices since the beginning of Russia’s incursion. Germany’s DAX fell sharply between 2 and 8 March from 14,000.11 to 12,831.51, but has since recovered to 14,457.80. The CAC 40 in France saw a similar slump between the 2 and 8 March from 6498.02 to 5,962.96, but has since seen a rebound similar to its eastern neighbour. Likewise, Spain’s IBEX 35 fell from 8,321 on 2 March to 7,644.6 by 7 March. It has since recovered to 8,430.5.
The current bump in European stock markets may be due to the tantalising prospect of truce between Russia and Ukraine. As CNBC reported yesterday, “Regional markets got a boost on reports that progress was being made in ongoing talks between Russia and Ukraine in a bid to find a peace deal.”