- Date : 19/05/2022
- Read: 4 mins
As the war rages on and crude oil prices rise, investors are scrambling for options other than investing in global energy.
US President Joe Biden has recently announced an import ban on Russian oil, liquified natural gas, and coal. Though the move has been welcomed by those wishing the war would stop, the stock market and active investors across the globe are in a frenzy. Prices of gas and other petroleum products are fixed by global trends. Hence, as the prices rise, the common public is lining up outside the gas station, shelling out more money than their budgets permit. However, despite the situation, market strategists are still optimistic and are asking active investors to watch the market for some time before making a decision.
Talks about recession
According to analysts and strategists, the stock market still has the scope to outperform at the equity and sector level, especially when it comes to global energy stocks. They recognise that a longer war of attrition might trigger further bold steps from the United States, causing another surge in prices in the long run. Still, the cool-off period would also be considerable. They are also hopeful that the talks about a recession are merely speculation. It would take more than sky-high global energy prices to trigger a recession. Additionally, the Indian economy is touted to be in decent shape despite the ongoing war, the pandemic, or even weak rural demand, and Indian investors might not find the situation to be a cause of immense worry.
Also Read: Top 5 industries affected by Ukraine-Russia War
Inflationary Shock
Energy costs are expected to push the inflation rates to the higher end, causing inflation to grow more than anticipated. That would indeed be a direct hit to the stock market. Even the common Indian as well as the investors will have to face the brunt for an extended period despite the Indian government's inclination towards taking a neutral stance in this war.
Studies suggest that every 10% rise in oil price increases inflation by 0.1–0.2% in the Eurozone, and a $10 per barrel rise in the US can lead to inflation increasing by 0.2%. Elevated inflation in the higher-income countries can potentially send the world into a state of inflationary shock. In India, apart from inflation, the already rising living expenses and dwindling income might add to the worries of slow growth. In turn, it might lead to lower demand, thereby leading to a decrease in corporate earnings.
Options for the investors
Analysts suggest not making hasty decisions. Liquidation of the assets in the face of an impending war of attrition might sound lucrative, but it might not be viable in the long run. A volatile market is known to behave in an unexpected manner, and it can bounce back sooner than foreseen. Some experts believe that if an investor owns stocks of a company with the primary source of its revenue in Russia, that might trigger a certain level of worry, triggering a quick reaction on their part. Otherwise, Indian investors can safely continue with their objectives.
Also Read: Where will gold prices go amidst Russia-Ukraine War?
Well-defined financial goals are a must for any investor, and that should be one's guide if they wish to further their investments or withdraw. Investments that have been made over a longer period of time might find ample space to bounce back despite a short-term war. If the objectives and goals of the investment are being met or would be met in the near future, experts would not advise the investors to consider other options just yet.
6 Ways in which the Russia-Ukraine conflict will hit global markets
A few strategists suggest that investors can diversify their investment options to better leverage the growing advancements in the healthcare, technology, and manufacturing sectors to balance their chances. Given the rapid growth of these industries in India, diversification into other industries might aid the concerns of investors stuck in a quandary.
The strategists also opine that though investors can begin looking into alternative sectors, sticking to their original plan and waiting a while to see how the market trends might also be a feasible option. The stock market is known to behave in a volatile manner, and expecting a crash just yet might not be sensible.
Also read: How to be prepared for the expected upcoming market volatility over the next year?
US President Joe Biden has recently announced an import ban on Russian oil, liquified natural gas, and coal. Though the move has been welcomed by those wishing the war would stop, the stock market and active investors across the globe are in a frenzy. Prices of gas and other petroleum products are fixed by global trends. Hence, as the prices rise, the common public is lining up outside the gas station, shelling out more money than their budgets permit. However, despite the situation, market strategists are still optimistic and are asking active investors to watch the market for some time before making a decision.
Talks about recession
According to analysts and strategists, the stock market still has the scope to outperform at the equity and sector level, especially when it comes to global energy stocks. They recognise that a longer war of attrition might trigger further bold steps from the United States, causing another surge in prices in the long run. Still, the cool-off period would also be considerable. They are also hopeful that the talks about a recession are merely speculation. It would take more than sky-high global energy prices to trigger a recession. Additionally, the Indian economy is touted to be in decent shape despite the ongoing war, the pandemic, or even weak rural demand, and Indian investors might not find the situation to be a cause of immense worry.
Also Read: Top 5 industries affected by Ukraine-Russia War
Inflationary Shock
Energy costs are expected to push the inflation rates to the higher end, causing inflation to grow more than anticipated. That would indeed be a direct hit to the stock market. Even the common Indian as well as the investors will have to face the brunt for an extended period despite the Indian government's inclination towards taking a neutral stance in this war.
Studies suggest that every 10% rise in oil price increases inflation by 0.1–0.2% in the Eurozone, and a $10 per barrel rise in the US can lead to inflation increasing by 0.2%. Elevated inflation in the higher-income countries can potentially send the world into a state of inflationary shock. In India, apart from inflation, the already rising living expenses and dwindling income might add to the worries of slow growth. In turn, it might lead to lower demand, thereby leading to a decrease in corporate earnings.
Options for the investors
Analysts suggest not making hasty decisions. Liquidation of the assets in the face of an impending war of attrition might sound lucrative, but it might not be viable in the long run. A volatile market is known to behave in an unexpected manner, and it can bounce back sooner than foreseen. Some experts believe that if an investor owns stocks of a company with the primary source of its revenue in Russia, that might trigger a certain level of worry, triggering a quick reaction on their part. Otherwise, Indian investors can safely continue with their objectives.
Also Read: Where will gold prices go amidst Russia-Ukraine War?
Well-defined financial goals are a must for any investor, and that should be one's guide if they wish to further their investments or withdraw. Investments that have been made over a longer period of time might find ample space to bounce back despite a short-term war. If the objectives and goals of the investment are being met or would be met in the near future, experts would not advise the investors to consider other options just yet.
6 Ways in which the Russia-Ukraine conflict will hit global markets
A few strategists suggest that investors can diversify their investment options to better leverage the growing advancements in the healthcare, technology, and manufacturing sectors to balance their chances. Given the rapid growth of these industries in India, diversification into other industries might aid the concerns of investors stuck in a quandary.
The strategists also opine that though investors can begin looking into alternative sectors, sticking to their original plan and waiting a while to see how the market trends might also be a feasible option. The stock market is known to behave in a volatile manner, and expecting a crash just yet might not be sensible.
Also read: How to be prepared for the expected upcoming market volatility over the next year?
