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Russian pullback of troops brings (temporary) calm to the markets

Feb 16, 2022

Redacción Mapfre

The markets can rest easy for a few days. The Kremlin's announcement of the partial pullback of its troops from the Ukrainian border came as a relief to many investors, who saw the indexes dip into the red on Monday, although this situation has not erased the recent losses. This latest strategic move by the Russian forces has shown that the indexes are panicking a bit. And although volatility may take a few steps back, the tensions are far from over.

How can a fund manager prepare for a situation like this? On Negocios TV, Ismael García Puente, investment manager and fund selector at MGP, recalled similar warlike events that had a short-term impact: “The market lost around 5-10% over a very short time, but three months later it had already recovered.” The reality is that “it’s almost impossible to prepare for this situation,” according to Gonzalo Lardiés, senior manager at AdBank. Logically there are events like the one this week that the experts cannot predict and, therefore, take into consideration in portfolios.

However, when it comes to diplomatic issues, Ismael believes that there are indeed a number of factors that investors should pay attention to. "The impact of potential sanctions on Russia, or cutting off the gas supply to Europe, is worrisome. This would put extra pressure on the ECB regarding energy dependence and the need to control inflation," the expert explained, also citing the importance of obtaining palladium and the production of some foods in Russia, which could “threaten the supply chain.”

It is clear that this situation “generates volatility in the stock markets," and that if the risk is controlled, there could even be opportunities in the market. In this context of instability, the expert said, MGP has considered which companies may be affected and concluded that the risk of contagion is minimal: “The situation in Russia barely affects portfolios.” However, he reminds us that diversification guided by professionals “is still the key.”

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