The impact of Inflation and the Ukrainian war on your portfolio.

Inflation, War, Financial Crisis and Market Crash are just some of the buzzwords in the news today. One can easily get worried, and fear is usually one of the leading factors when it comes to making costly investment mistakes. 

So, to help create some context, let’s explore the interesting scenario below.

Let’s say you are 60 years old and planning for a multi decade retirement of between 35 and 40 years – let’s take the middle ground of 38 years. With advances in medical science it’s perfectly possible that you could live this long and will need income to support your lifestyle. 

So, turning the clock back, what would have happened if you had retired 38 year years ago – in 1984? What was going on in 1984?

Historical Events

  • This is the year of the Bhopal Disaster, Band Aid, UK miners’ strike, Brighton Hotel Bombing, WPC Yvonne Fletcher & the famous collision between Zola Budd & Mary Decker during the 3000m Olympic final.
  • Global Flash points: Lebanon, Iran-Iraq, Palestine, India-Pakistan, Afghanistan, Sri Lanka & NATO v Russia (Cold War)
  • Reagan is US President, Thatcher in the UK, Konstantin Chernenko – announced USSR intention not to participate in the Summer Olympics due to “anti-Soviet hysteria being whipped up by the US”

State of the Economy (1984)

  • UK Interest rates were 9.5% in 1984 rising to 11.3% the following year
  • UK Inflation was 4.96% in 1984, rising to 7% in March 1985 (compared to average of 12.5% p.a. 1970 – 79)

Global Market Collapses since 

1980s

  • Recession 80-83
  • Black Monday 87

1990s

  • Recession 90-92
  • Black Wednesday 92
  • Russian Financial Crisis – 98
  • Argentine Great Depression – 98-02

2000s

  • Recession 00-01
  • Dot.Com Bubble 00-02
  • Financial Crisis 08
  • Russian Financial Crisis 08-09* (Georgia)

2010s

  • 2014 Russian Financial Crisis (invasion of Crimea)
  • Chinese stock market crash – 2015
  • Argentine Monetary Crisis

2020s

  • Market Crash of 2020
  • Russian Financial Crisis 2022

So, what have investments done since 1984?

A portfolio with 60% in global equities and 40% in global bonds (a proxy for our most popular investment portfolio, CAM60) has delivered 8.35% p.a. annualised!

The takeaway

There is always a ‘crisis du jour’ and reasons to be worried. However, the best thing to do is take a long-term approach to investing and not permit any short-term volatility to influence your decisions. It pays to be patient.

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