From the petrol-station forecourt to the supermarket aisles, you don’t need to go far for evidence that we are living through a period of economic instability.

In each of these places, UK consumers are seeing the costs of their everyday necessities driven higher by escalating wholesale prices. Petrol and diesel, climbing at the fastest-ever recorded rate, continue to reach new highs while food-price inflation is accelerating.

The reasons behind these notable shifts are diverse, but the conflict in Ukraine is clearly a dominant factor, given Russia’s influence on global oil and gas markets and the region’s influential position as a significant exporter of wheat.

And while the war must primarily be seen in its context as a humanitarian crisis, these shockwaves show there are also economic implications. Indeed, the UN’s trade and development body downgraded its global economic growth projection for 2022 by 1% in reflection of a challenging outlook for a world that was only just beginning to emerge from the depths of a fiscally painful pandemic.

Taking steps to protect your wealth

For individual investors looking on from the outside, one of the many strands to this unsettling situation is the sharp focus that it applies to questions regarding savings and investments. In seemingly volatile times, when there is a risk of further market shifts, is it advisable to take action to protect your wealth?

The answer is not necessarily a simple one, but there are some important factors to consider. The first is to be wary of the potential for emotion to cloud financial decision making. In particular, the anxiety that people might feel at these times is unlikely to be a helpful influence when it’s generally advisable that your thinking is driven by reason and rational thinking.

To avoid the risks associated with knee-jerk activity, it is helpful to be able to refer to a wealth management plan, which confirms your long-term goals as well as the strategies for achieving them via savings and investments.

Being equipped with a plan and a longer-term view provides a degree of buffering between you and any short-term market movements. All investors should recognise that markets are subject to downturns as well as upturns, and it can be sensible to ride out any waves in the context of an investment strategy that spans years rather than months or weeks.

Staggering investments, smoothing fluctuations

Certain approaches can be adopted to help soften the possible impact of market fluctuations. This includes ‘pound cost averaging’, which involves making a series of regular, smaller-scale investments in shares or units over time rather than fully committing a larger lump sum at a single point. Timing, of course, is everything when it comes to investing, and this approach is designed to offer some protection to investors by limiting their exposure to the risk of the market falling sharply in the period immediately after they have invested.

During a down-market period, a pound cost averaging strategy means that investments are made at ever lower prices. While helping take some of the worry out of making larger isolated investments, it is also a valuable way of instilling a sense of discipline through the practice of regular saving or investing, ensuring you are consistently working towards personal goals.

When it comes to pensions, the conflict in Ukraine could potentially impact the value of savings if companies and products into which pensions are invested are negatively affected.

However, there is no simple rule correlating the conflict with financial performance. Supermajor BP, for example, announced in late February it may have to take a $25bn hit from its decision to exit the 19.75% shareholding it has held in Russian energy giant Rosneft since 2013. To date, the company’s share price has held firm – although there are never any guarantees that this will remain the case.

Learning lessons from the past

For many people, the link between share price movement and pension savings will be closely monitored by fund managers who are balancing ambitions for long-term growth against shorter-term challenges and individual appetite for risk. Diversification of investments – in terms of companies and products – is key in achieving this balance while also helping withstand market shocks.

For those who remain concerned or anxious about the outlook for their wealth, it is also worth returning to recent history for perspective. In 2020, in the immediate aftermath of the Covid-19 crisis, there was an initial fire-sale in stocks as the world faced the troubling prospect of how it would cope with a previously unknown and highly infectious virus. A 3.6% contraction in global growth triggered a major worldwide recession. In the same year, however, the MSCI AC World index showed that global equities delivered an impressive 15% return.

Of course, there are various complex factors at play behind these figures, and gains will not have been universal. They do, however, underline the importance of seeking out professional advice in uncertain times to ensure you’re making reason-based, information-rich decisions for the long road ahead.

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or its associated representative shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.