The Royal Bank of Canada also acknowledged the phenomenon earlier this week, seeking to reassure its customers in an email entitled: “The Russia-Ukraine conflict and your investments”.
“The escalation of geopolitical tensions between Russia, Ukraine and NATO may cause you to ask questions,” writes the institution.
“Despite alarming headlines regarding inflation, protests and acts of war, it is important to remember that market fluctuations are normal. »
She adds that “in the past, we have found that the reaction period to acts of war is often short, and that markets tend to recover quickly from these events”.
This analysis is quite correct, adds Jean-René Ouellet, investment strategist and discretionary manager at Desjardins Wealth Management.
In an interview with The Canadian Press, he recommends “keeping a cool head”, staying on course and avoiding hasty actions in response to events.
“It’s never the time to get out of a roller coaster in the middle of the ‘ride'”, he illustrates.
What history shows us
He explains that with the exception of the Second World War, and the response to the attacks of September 11, 2001 (which coincided with the implosion of the technology bubble), conflicts have a limited effect on the stock market.
For example, it took them 31 days to bounce back in the Vietnam War, and only nine in the Cuban Missile Crisis. By comparison, markets took 822 days to recover from World War II.
Experts have listed a dozen major conflicts since 1914.
“Geopolitical disturbances generally have fairly brief repercussions on the stock markets, so there is no need to panic,” argued Jean-René Ouellet, who advocates patience and restraint.
Especially since the Russian-Ukrainian conflict remains for the moment “limited” to this region of the world, according to him.
“The markets — and this is where it’s a bit embarrassing — will look ahead. (…) We will remain in economic expansion, no slippages. There aren’t that many changes. »
The chances of the situation degenerating into nuclear war remain low, said Michel Doucet, vice-president, investment strategist and discretionary manager at Desjardins.
“The message is clear: the United States and NATO will not enter Ukraine. World War: low probability. Global recession: low probability,” he summarizes.
To further comfort the worried investor, he indicates that at 0% since the beginning of the year, the Toronto Stock Exchange (TSX) is far from its average intra-year decline. Just like the S&P 500.
Focus on a balanced portfolio
Despite everything, clients have reported to Mr. Doucet being “nervous regarding what I see”. He attributes this nervousness to the fact that in 2022 it is possible to follow the Russian invasion of Ukraine “in real time”.
“We have to get back to basics,” he insists. I build a portfolio that is my mirror, and I never let emotions take over. (…) Money is managed coldly. »
“Stay within your investment profile, consistent with your investment policy”, he adds, while Jean-René Ouellet warns once morest the danger of selling “in panic” and causing “permanent damage to one’s heritage”. .
“Having safe havens in your portfolio is fine. To have only that is not good investor behavior,” reminded Jean-René Ouellet.
It is absolutely necessary to distinguish “what we see on television, which is horrible”, from the state of the economy and the markets, adds Louis Lajoie, senior investment strategist and portfolio manager at the National Bank.
“For us, it’s regarding staying the course. Concretely, we are still quite optimistic regarding the stock markets for the future. (…) We have not changed our strategy,” he said in an interview.
Like his peers, Louis Lajoie recommends having a diversified portfolio, part of which will always be “well positioned”, even if it means making marginal adjustments, if necessary.
