In the wake of Russia’s invasion of Ukraine, George Evans, Invesco’s chief investment officer, global equities, posits the ways in which this war could impact markets. “The current situation is completely fluid, and there is very little information to indicate how it will develop,” Evans writes. “In our opinion, it is best to do nothing under those circumstances if you have the luxury of that option — and we do.”
Evans added that Invesco’s portfolios “had no direct exposure and very little indirect exposure to Russia and Ukraine going into this crisis,” and the company has “not made any significant portfolio changes in response to it.”
Regarding rate increases, Invesco recognizes that the considerable rise in oil prices caused by the Russian invasion will likely result in the Federal Reserve raising rates at a lower level than would have otherwise been the case. This may seem counterintuitive when you consider that the Fed plans to raise rates to fight inflation, and higher oil and gas prices raise inflation. But higher energy prices also weaken consumers’ spending power.
Energy prices may stay elevated through the rest of the Northern Hemisphere winter and into the US summer driving season. But at these prices, oil and gas producers like OPEC members and US shale oil frackers are incentivized to produce and sell more.
“It is worth remembering that two years ago, in March 2020, oil collapsed to a low of $24.72 for a barrel of Brent, even less for some other types, as COVID reduced demand while Russia and Saudi Arabia flooded the markets with oil in a price war,” writes Evans. “Those were unusual circumstances, but so are the current ones; both demonstrate how quickly and to what extent commodity supplies and prices can fluctuate.”
Invesco acknowledges that the outlook is uncertain when it comes to global growth. But according to Evans, many secular trends — such as digitalization, increased cybersecurity, and the growth of telemedicine — will continue to grow faster than the global economy over the medium to longer term.
Invesco’s global equity team invests in long-term secular growth trends through companies that can be sustainably monetized, buys these companies when they are attractively valued, and holds them for many years to give their returns on Invesco and Invesco’s investors’ capital the potential to compound over time.
Invesco has several global equities ETFs available, including the Invesco Focused Discovery Growth ETF (Ticker: IVDG), the Invesco Select Growth ETF (Ticker: IVSG), and the Invesco International BuyBack Achievers ETF (IPKW).
“We are long-term investors, as opposed to short term traders, and we will continue adhering to our discipline as we watch events in Ukraine unfold,” Evans writes.
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