Investing Through a Crisis – What War in Ukraine Means for Markets


Article written by Richard Cole, Fund Manager from Future Money LTD 04/04/22

The Cause of a Crisis

Finance, public health and geopolitics.  Three distinct fields which each have their own rules and meanings, yet all of which, when in extremes, can lead to crisis for global society.  The banking collapse of 2008, the COVID pandemic and now the war in Ukraine.  Very different causes in each of these scenarios, but similar outcomes for investors at the headline level. 

Uncertainty Breeds Fear

When any event rises to such prominence that the workings of the global economy come into question, the initial reaction of investment markets is likely to be one of fear.  Equity markets typically fall as the profitability of companies is assumed to deteriorate, and bond markets rally as the fixed returns they offer become more desirable. 

Historical Comparisons

Similarities can therefore be drawn between the financial implications of Russia’s invasion of Ukraine and that of any number of notable events of recent years, including the Global Financial Crisis and COVID, but also Brexit, the European Debt Crisis, and the US-China trade war, to name a few. 

Initial market reactions can therefore be predicted fairly accurately after the outbreak of a world changing event, but beyond those early stages of uncertainty and potentially panic, greater divergence in market performance is likely.  In the long term, however, recovery for diversified portfolios typically emerges. 

Global Financial Crisis

The recession of 2008-09 caused broad disruption across the economy as banks cut lending and austerity supressed the speed of recovery.  Bonds experienced a huge rally, as quantitative easing and low interest rates pushed prices higher, while equities in faster growing economies, such as those in Asia, particularly prospered. 


In response to COVID lockdowns, huge fiscal and monetary stimulus was released, meaning that consumers were strong, yet lacked the opportunity to spend.  In this scenario, goods producers and particularly those in the technology sector rallied, while service providers such as travel and leisure firms languished. 

Ukraine – The Economic Impact

In response to the economic disruption of the Ukraine war there appears to be a different narrative once again.

The threat to Ukraine and its people are the most important consequences of this war, yet beyond this, the disruption to the supply of oil, gas and agricultural commodities such as wheat are likely to be the biggest disruptors to the global economy.  Ukrainian exports have been interrupted due to lost land, labour and infrastructure capabilities, while Russian exports are heavily sanctioned.  An economic war is the way the West is confronting President Putin and this is not without its costs.  To the average European consumer, higher energy prices are the biggest impact from this conflict; and to the economy overall, the inflationary force this creates is paramount.

Inflation Amplified

Prior to the invasion, inflation was already the dominant story for markets, as Covid-induced supply chain problems collided with buoyant demand, leading to rising prices.  Expectations had been for this to be a short term factor which subsided from this summer.  These trends broadly remain, but due to the outbreak of war, they have been amplified. 

Rising Interest Rates

Inflation numbers were already at multi-decade highs in the UK, US and Europe and are now expected to continue to rise as we move through 2022.  Inflation is still expected to fall late this year or early 2023.  Yet, given central banks’ objectives to achieve inflation of around 2%, inaction is no longer feasible and hence interest rates are being raised in an effort to tame rising prices.

Balancing Suppression

The downside of this action is that economic activity is suppressed and here lies the main risk to the global economy from the situation in Ukraine.  While key economic indicators such as GDP growth and unemployment are currently very positive, they are likely to suffer as interest rates increase. 

Central bankers must therefore tread a very fine line to successfully control inflation without choking growth to the point of recession.  This will be a difficult challenge, but given the current strength in the economy it is achievable. 

Inflationary Investing

For investment markets, therefore, a solution must be found to the quandary of higher inflation and slower growth.  The fixed returns of bonds and cash would typically be favourable when growth is falling and so can provide a defensive ballast, but these do tend to suffer as inflation erodes their real value.  Equities will face challenges from slowing growth, but through selective positioning, growing revenues can be used to offset inflation.  

It is equities, therefore, which seem most able to cope with the challenges of this inflationary period and especially those which can benefit from higher interest rates and higher commodity prices.  This is not a perfect solution, however.  The threat of slower growth means that higher levels of volatility are to be expected. 

The Path Ahead

Changeable markets may cause periods of unease and the horror of the war in Ukraine is certainly one such case.  As in previous crises, the initial market reactions were of fear, yet they then diverged with inflation linked assets in favour.  Ultimately, however, as previous crises have shown, patience is a virtue, with well diversified portfolios benefitting from remaining invested over the longer term.  Looking at the likely path of the economy for the coming years, we believe this will continue to be the case.

Important Information

Please note that the contents are based on the author’s opinion and are not intended as investment advice. This information is aimed at professional advisers and should not be relied upon by any other persons. Any research is for information only, does not constitute financial advice or necessarily reflect the views of the author and is subject to change. It remains the responsibility of the financial adviser to verify the accuracy of the information and assess whether the fund is suitable and appropriate for their customer. Past performance is not a reliable indicator of future performance. The value of investments and the income derived from them can fall as well as rise and investors may get back less than they invested.

Important information about the funds can be found in the Supplementary Information Document and NURS-KII Document which are available on our website or on request. 

For any information about the Future Money funds please contact the authorised corporate director, Margetts Fund Management Ltd, on 0121 236 2380, or at 1 Sovereign Court, Graham Street, Birmingham B1 3JR.  A copy of their Terms of Business which relates to investments into the funds can also be obtained using these contact details. 

For independent financial advice, please get in touch with one of our financial planning & wealth management team on 0808 144 5575 or email

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