The war might be in Ukraine, but we’re all going to feel it
Have you felt the pain at the petrol bowser yet? Blame Vladimir Putin. The Russian President’s invasion of Ukraine is already having global impacts.
While Ukrainians suffer through the very real fear and danger of missiles raining down on them, the rest of the world has also started wearing the consequences, as the sanctions against Russia start to impact global supply lines and spur on inflation.
The even worse news is petrol prices are expected to rise north of $2.50 per litre, with some pundits predicting $3 per litre might be on the horizon.
This is exacerbated by the fact that many Australians, Melburnians in particular, are still tentative to get back on public transport thanks to COVID, which means we’re churning through the petrol more than we ever have.
Obviously, a bit of pain to the hip pocket for us here doesn’t compare to the horrible suffering that Ukrainians are going through, but the point is that while this war may feel a long way away, we’re all going to be impacted by it, and the sooner it’s over, the better.
A surge in oil prices, given new momentum by the US embargo on Russian energy, has raised concerns that sustained inflation and lower economic growth could collide, which could lead to a 1970s stagflationary era. Russia bought about 8% of all US petroleum exports in 2021.
The not-quite-as-bad news is that our share market hasn’t fared as badly as some expected – yet.
The Australian share market is down just under 8% since its high on 4 Jan, while the S&P500 is down 13%, and the tech-heavy NASDAQ is down 21% from its November peak. A big part of the reason our market has outperformed globally has been the strength of resources stocks.
It’s not clear whether we’ve hit the bottom yet, or if it’s still to come, but the feeling out there is that solid companies will be fine.
The good news is that recent Australian corporate earnings easily beat the forecasts, as did the US, which should bring a small amount of comfort to investors.