Concerns are mounting that the ongoing conflict in the Middle East could trigger a prolonged period of market instability, reminiscent of past oil shocks that took years for equity markets to recover from. While Slovakian investors haven’t experienced such a protracted downturn – most having begun investing within the last decade – experts are weighing whether the current situation demands a reassessment of risk tolerance and investment strategies.
Brent crude has already surpassed $115 per barrel following recent escalations, according to Across analyst Dominik Hapl, who cautioned against making hasty changes to investment plans during periods of market shock. “The biggest mistake is often to change your plan in the middle of the shock,” Hapl stated.
Finax economist Patrik Kindl drew parallels to the 1970s, while acknowledging the significant structural differences in today’s economy. “The current situation is exceptionally similar to that of the 70s,” Kindl noted. However, he doesn’t anticipate a “lost decade” with a 50% decline in market indices.
Roman Scherhaufer, Director of European Investment Centre, echoed this sentiment, recommending investors stick to their long-term strategies. “I don’t believe the current crisis will lead to a lost decade and a 50 percent drop in indices,” Scherhaufer said.
We asked:
1. I am concerned that the current oil crisis will unfold as in the past, leading to lost decades and long-term stagnation for investors. How should I behave as a long-term equity investor focused on broadly diversified ETF funds? Is it time to reassess my risk tolerance, as long-term stagnation may not yield satisfactory returns even from stocks?
2. Is it now appropriate to allocate new investments differently or adjust existing portfolios? Could real estate funds or direct property investments be more attractive now? Or is it better to lean towards gold or the Swiss franc in this uncertain environment? Are bonds even sensible in light of current pressures?
3. Is regular investment in a global ETF still a viable solution for weathering this situation? What would have to happen for this universal advice to become invalid? Should I continue with regular contributions or save cash for later purchases during market downturns?
They answered:
- Tomáš Vranka, equity analyst at XTB
- Dominik Hapl, portfolio manager at Across Private Investments
- Roman Scherhaufer, Director of EIC
- Patrik Kindl, economist at Finax
- Martin Smrek, Head of Product Management at Tatra Asset Management
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