Current Situation on Financial Markets...

Current Situation on Financial Markets...


What is currently happening in the markets and are there reasons to worry?

The current situation in Ukraine evokes many emotions and considerable concerns about future developments among investors. Thoughts of investors revolve around whether to adjust portfolios, sell investments, or conversely wait for further declines and then buy securities.

How to react to the current developments? 

Although the current situation is very serious and arouses many emotions, it is necessary to try to free oneself from them and focus on objective information, avoid panic, and not sell off one's portfolio, which has been built over many years. 

We carefully monitor the situation for our clients and keep them informed about everything. The investment portfolios of our clients are prepared for all possible scenarios, including wartime conflicts. 

How are the portfolios prepared? 

  1. We focus on secure investments in the largest companies in the democratic world. We all know their products or services and use them daily. These are companies that will withstand crises like Apple, Tesla, Microsoft, etc. We don't invest in small companies in the developing world, where there is a high risk of corruption and political instability.

    We emphasize the quality of companies in funds, their history, growth factor, geographic and sectoral distribution, as well as low costs.
  2. Investments are currency-hedged. The main currency in which we invest is the US dollar, which is strengthening in the current crisis, while other currencies, including the Czech crown, are weakening. This guarantees that the decline is not so significant.

    The US dollar is the main global currency, accounting for 70% of transactions. In crises, the United States traditionally acts as a safe haven where everyone seeks refuge. The current crisis is no exception.
  3. We always diversify portfolios for our clients, so we don't rely on one asset. We invest in stocks, bonds, different sectors, and many regions. 

How significant is the decline? 

The decline in the S&P 500 index from its peak reached on January 4, 2022, to its lowest point at the beginning of the Russian invasion (February 24, 2022), is 14.5%. 

The decline in stocks is lower than at the beginning of the pandemic (of course, it always depends on the region - developing markets and affected countries are different...). Another decline could certainly still come. 

At the beginning of the pandemic in 2020, the decline was 35%. Therefore, it is still a significantly lower and less steep decline than associated with the onset of the coronavirus pandemic. 

We are currently buying stocks at prices as they were six months ago. So, if you have available funds, now is a good opportunity to invest part of them in stocks in the democratic and developed world. 

Fear currently dominates the markets, and many investors, overwhelmed by a deluge of bad news, succumb to panic and sell off their portfolios. This drives stock prices down.

However, markets have historically shown long-term growth, and the largest drops in stock prices have been observed historically before the outbreak of conflict. Markets do not like uncertainty. Selling during the initial market decline is therefore not the most appropriate solution.

How are we handling the situation? 

Currently, we are buying additional stocks in our clients' portfolios, taking advantage of their lower prices. This rebalances the investments so that they grow faster after the recovery.

Final advice: Try to keep emotions in check, stick to a long-term strategy, and if possible, buy more stocks. The biggest mistake would be an emotional sell-off.

If you have any questions, we are here to help!

Do not hesitate to contact us


Ing. Petra Štěpánková, MBA, EFA

+420 604 218 602

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