What war in Ukraine means for investors

Just a few minutes ago, Russian President Vladimir Putin announced a "special military operation" in Ukraine - an apparent euphemism, for the world watching on, for "invasion". Despite weeks of speculation, the news of war in Europe is truly shocking no matter where you are on Earth.

Most investors have never witnessed anything like this in their lifetimes, and how markets react in the short term is anyone’s guess.

Just a couple of days ago, I had an in-depth discussion about what were then just ‘tensions’ in Ukraine with Tim Toohey, head of macro and strategy at Yarra Capital Management. We discussed the likely effects on different parts of the market, as well as the best way to hedge portfolio risk.

In this episode of The Rules of Investing podcast, we also hear why markets may be underestimating the rate rises set to come from the US Federal Reserve, and he explains a critical piece of data out of China that could have global ramifications.

This episode was recorded on 22nd February 2022. 

Read a written summary below. 

Macro

Tim Toohey: How Ukraine war will affect stocks, bonds and commodities

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Timestamps:

• 1:30 – Conflict in Ukraine and what it means for investors
• 12:27 – Why the China-Taiwan tensions should be forgotten
• 15:24 – What’s the best portfolio hedge for times like these?
• 20:56 – Where rates are headed in Australia and abroad
• 25:58 – How equities might perform if (when?) rates rise
• 30:08 – A critical piece of data from China that’s been largely overlooked
• 35:20 – Chinese property: Are there more ‘Evergrandes’ coming?
• 42:24 – Oversupply in Australian housing. But how far does it fall?
• 47:18 – Tim answers our three favourite questions. 

Reading recommendations:

• Lords of Finance: The Bankers Who Broke the World, by Liaquat Ahamed. Available on Amazon and Booktopia. 
• Nudge: The Final Edition, by Cass R. Sunstein and Richard H. Thaler. Available on Amazon and Booktopia. 

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