It has been nearly 80 years since World War II, and since then the world has enjoyed relative peace. But the Russian invasion of Ukraine put an end to that peace. A massive economic and humanitarian crisis is under way, the impact of which will be measured around the world. In response to the invasion, countries around the world imposed severe economic sanctions on Russia in the hope that economic pressure would bring the conflict to an end.
Of course, economic sanctions not only affect the target country, there are global consequences for countries that have long worked to reduce barriers to international trade. Among the other repercussions of this war, there was volatility in the stock markets, and the Moscow Stock Exchange was completely closed to prevent a complete meltdown. So what should investors do to protect their investment portfolios?
Impact of the war on oil
What is missing from the sanctions imposed on Russia so far is the ban on the import of Russian oil and natural gas. But this omission is deliberate because Europe relies heavily on both. Sure, sanctions on Russian energy will be painful for Russia, but they will also drive up oil and natural gas prices for the rest of the world.
If such sanctions are implemented, Russia’s largest European customers, namely Germany, the Netherlands, Italy, Poland, Lithuania, Finland, Greece, Bulgaria and Romania, will find themselves in an energy precarious position. A supply disruption will have unpredictable consequences and may lead to difficulties in meeting basic needs such as heating homes.
Sanctions on Russian oil and natural gas are not on the table, but the escalating situation in Ukraine may require this extra step. Until that time comes, the world has begun to witness economic changes that may turn the economy upside down. In the United States for example, oil prices reached their highest level in 14 years.
Impact of the war on stock markets
The war between Russia and Ukraine and the world’s reaction to it created an extraordinary dynamic. Russia is generally considered strong in military terms but less powerful in economic terms. In an effort to avoid armed conflict, Western countries are responding to Russia with economic measures while walking away from anything that might push NATO into all-out war. But the economic sanctions that have been imposed are not without flaws.
The global economy is deeply intertwined, and this interdependence means that harming one country’s economy will also affect others. What happened in the aftermath of this war is the negative reactions presented by global stock markets in the face of high oil prices and other economic changes.
Where do you invest your money in times of war and crises?
1. Oil and Energy: The first step to securing your portfolio at a time like this is to research options for investing in oil and energy, as they are considered among the best wartime investments. The most obvious option is direct investment in oil and energy stocks.
It makes sense to invest in oil companies whose profits are increasing as a result of high oil prices, as well as clean energy companies that have amazing profits on the horizon, a promising growth path and a relatively low share price.
2. Palladium: When stock market volatility looms and there is the potential for a major recession, investors often turn to more stable assets. Bonds are a popular option, followed by precious metals such as gold and silver. But under these circumstances, investors who want to increase exposure to the precious metal are better off with palladium-related assets, and its prices will likely rise significantly.
The simplest way to invest in palladium is through ETFs that track palladium bullion, so you can get the benefits of investing in palladium without the logistical challenges of buying and storing physical metals. There is also the option to purchase shares in companies that produce or trade palladium. It is important to note that most of these companies work with multiple precious metals, so they cannot be considered pure stocks of palladium.
3.Stock: There are a number of industries that do well under the current set of conditions. There is a set of recession-proof consumer staples that don’t suffer much when the stock market is down because they are a necessity for consumers.
Some investors also decided it was time to embrace Warren Buffett’s shares in Berkshire Hathaway, where his methods have weathered economic ups and downs for decades. Berkshire Hathaway already has positions in the energy, financial and consumer goods sectors that generate consistent returns regardless of market volatility. Even better, a single share of Berkshire Hathaway offers the same kind of diversification as a mutual fund or ETF, where each share represents the ownership of dozens of assets.
4. ETFs It is difficult to create the right amount of diversification without large sums of money. Buying shares in a variety of companies, creating a balance between sectors, geographies, market value, etc. is very expensive. Therefore, exchange-traded funds (ETFs) are a viable alternative.
What stocks should I dispose of?
As you reorganize your portfolio in response to changes caused by the war, stocks in some industries are a sure sell.
Unfortunately, the travel industry in general and the airline industry in particular will likely not see the recovery they were expecting after COVID. Increased fuel prices will also cut profits, and travelers may also reconsider their plans in light of the current crisis in Europe.
The auto industry faces challenges on multiple fronts as well. First, consumers tend to delay car purchases in times of economic uncertainty. Second, higher oil prices mean less demand for cars. Third, disruption to palladium supplies will cause industry-wide chaos. Overall, selling auto stocks would probably be a smart move.
Notably absent from the list of the best wartime investment are stocks and funds focused on Russian companies.
How will the markets be affected if the war lasts longer?
It is difficult to say exactly how the markets will be affected if the war continues for a longer period as there are many factors that could influence the situation. Additional sanctions against Russia, especially if they are linked to energy production, are likely to push oil prices higher, amplifying already existing market volatility. There is also the possibility that the sudden surge in oil prices will push the US into recession, although the risk of a recession is now more serious in Europe.
The bottom line is that historically, markets don’t continue to fall after the initial drop, the one we’ve seen since the beginning of this year. That is, despite the length of the conflict, whether the United States is involved in the actual battle or not, there is still a great potential for the stock market to recover and continue to grow.
Best wartime investment in your country?
In wars, the answer, in most cases, becomes clear and explicit to the question of money and self, which is to flee, where the best investment for money in wartime is for you and your money to flee outside the country, sell what you can sell, get rid of the local currency, withdraw your money as much as you can from the banks and take what is left In one hand and in your other hand, you perish and come out, potentially irreversible.
Such an answer is economically correct in a place, but the question is: Is there an opportunity or possibility for those who have decided to stay investing their money at home in times of war?
1. Get rid of cash
The worst thing you can have in a time of crisis after risky investments is cash, and the worst of it is cash in banks. Withdrawing money is certainly a selfish and harmful behavior from the point of view of the state, and its negative impact will be multiplied by the number of its practitioners.
The first economic reaction that occurs before a crisis occurs in a country is the withdrawal of capital, we are not talking about the thousands that you have in your account, but we are talking about the billions owned by investors who move first and move quickly to save their money from the country by withdrawing it from their balances or converting it into a foreign currency, which It generates the beginnings of the collapse of the value of the currency, which occurs in a sequential cycle (chain effect) that the state stops at some point by preventing or placing restrictions on the withdrawal and transfer of funds, as well as the purchase of foreign currencies.
If your luck is good, you will get rid of the local currency as much as you can, and if you don’t realize it, the first lesson and rule in your wartime investment plan is not to keep cash in your pocket.
2. The traditional solution: buy gold
In its simplicity, it is indeed one of the most correct solutions in times of economic crises and wars, but why is gold considered an ideal solution?
Gold, like all precious metals that can be bought such as silver, diamonds and jewelry in general, is considered an economic tool against crises and economic fluctuations, and its global value represents a material safety barrier for those who own it during wartime, and in many cases it is considered the best investment after the end of the crisis.
The main problem with gold solutions (and its other alternatives) is the possibility of securing it, hiding it or transferring it. Safety considerations in a country ignited by war reach its lowest levels, and the chances of theft, looting and damage to property rise.
3. Owning assets
It is one aspect of investment that you should exercise with caution. Assets are distinguished by their original value over time, so they are originally considered a safe investment that is not affected by the deteriorating economic situation in the country.
Of course, one of the best options in this case is to buy vacant land licensed for construction, then agricultural land, and finally buildings.
The risks of such investment come first on the buildings, which are subject to demolition under fire and bombardment, secondly, the possibility of theft of crops or the exposure of the land to vandalism and burning as well if they fall within the circle of clashes, and the last risk is in the chance of losing property rights completely and the state’s acquisition or nationalization of private property.
Therefore, your direction for such a long-term investment should be based on an appropriate choice that takes advantage of the dramatic decline in land prices and avoids the risks of property damage and loss.
Some non-traditional alternatives, such as the purchase of livestock, cars, commercial licenses, and property rights, may also be included in the asset classification.
4. Trade of raw materials
But if you find yourself compelled to find a business solution that can provide your family with a basic monthly income, then you must trade in basic and raw materials.
Of course, the first reaction to the situation of war is the relinquishment of individuals for their secondary needs, the cessation of service activities and the collapse of the trade of luxuries and luxuries under the pressure of lack of cash and low consumption rates; The safest trade is in food, fuel, and daily necessities.
We use here the original rule (not keeping cash) as a main strategy in the buying and selling practitioner, so do not sell on credit and try to reduce storage periods.
The risks of inflation and currency collapse will be with you all the time as long as you keep the trading money in your hands. The buying and selling cycles should be as short as possible as people are consuming less than usual and commodity prices are always one step ahead of you; Open three small stores better than one big one, buy the day you sell out and don’t wait for tomorrow.
5. Is the stock market a solution?
In principle, yes, there is scope for safe investing in stock exchange stocks and bonds; Resorting to local private equity is certainly tantamount to suicide and depreciating an owner, but opting for shares of state shareholding banks or raw material suppliers can be a better investment.
The purchase of government bonds is the safest option ever in the stock market, but it is also the least profitable, as governments are the most trusted party in the financial market, and the investor guarantees the recovery of the value of the bond they have even with the deterioration of the economy; Certainly this is a general principle, if we are talking about a stock exchange that is already active and a country that has a balance of confidence.
6. Invest in people!
This is the last outlet, which cannot be ignored as an available economic solution.
To invest in educating your children by purchasing a means or an educational lesson for a new language, skill or craft for them, or securing an opportunity to travel abroad, or health spending on them, or even lending to trustworthy individuals who guarantee that they will return the loan to you in its original value when you need it.