Welcome to this week’s Market Wrap. After a spell of downward pressure, equity markets have generally been much stronger in the UK, US, Europe and Australia this week. On a 1-year basis, European stocks have understandably struggled most, with the Ukraine/Russia war dominating the backdrop.
Index changes
This Week | 1 Month | 1 Year | |
FTSE 100 | +2.6% | -1.7% | +8.9% |
FTSE AIM All Share | +2.6% | -3.3% | +14.5% |
S&P 500 | +5.7% | +1.4% | +12.7% |
FTSEuroFirst 300 (ex-UK) | +3.3% | -2.5% | +5.1% |
S&P/ASX All Ordinaries | +2.0% | +0.9% | +8.1% |
Source: Stockopedia, London Stock Exchange
Whether these very recent signs of improvement will continue is far from clear. But if research by the indexing giant Vanguard is accurate, it may not take long as you might think for markets to regain some composure. Their analysis of nearly 25 geopolitical upheavals over the past 60 year shows that equity markets generally start to recover within months of a major event:
Initial sell-offs - which can vary in length - are usually contained to within 5%. Six months later, markets are usually in recovery mode - and then well into double figures at the 12 month mark. But whether these trends repeat amid the current turmoil is far from clear…
What is true is that the huge geopolitical and economic waves caused by this conflict are still yet to play out. One immediate consequence seems sure to be higher inflation (for longer), and there was an interesting post by Ben Carlson this week on why a recession could be one of the only ways that high inflation will ultimately come down.
All eyes on oil
Oil prices continue to capture the headlines, but the recent surge has weakened this week - with WTI at around $103 /barrel:
Source: Trading Economics
With global supply issues under the microscope, US oil majors have been among the big momentum winners over the past month.And for investors, this presents an interesting question…
On one hand, oil supply constraints (and a rising oil price) caused by the Ukraine conflict arguably make oil stocks more attractive. Not only that, many many of these shares have been languishing in value territory for years. Given that we’re already seeing a rotation from growth to value this year, that could mean they’re particularly well placed to outperform. If future oil supply becomes a more substantial problem over the medium term, oil stocks may well look attractive (and there is…
