As fear and uncertainty continues to impact markets globally, T. Rowe Price has encouraged investors to extend their time horizon and not get caught up in the noise.
“There is no doubt that investors are facing a tall wall of worry at present; the war in Ukraine, record inflation, soaring energy prices, Fed tightening, rising recession risks, the sell-off in growth stocks and China’s weakness,” said head of Australian equities and portfolio manager at T. Rowe Price, Randal Jenneke.
“With such a heightened degree of uncertainty, investors’ nerves are being tested and there has been a lot of difficulty for many to navigate the complexity. During these times of panic, it can be helpful to keep things simple.”
Looking back at other periods of panic over the past four decades, Mr Jenneke noted that panic was typically short-lived and presented an opportunity to investors.
“Today, some of Australia’s most innovative companies with solid longer-term growth prospects are trading at depressed valuations,” he said.
“This is a time to take a breath and increase your time horizon – the risk/reward set-up has markedly improved for some of Australia’s highest quality and strongest growing companies.”
While Russia’s economy is not large enough to have a significant impact on global GDP directly according to Mr Jenneke, one area where Russia’s influence has been clearly felt worldwide is the commodity market.
Mr Jenneke said that commodities such as oil and nickel appeared to be trading on “day-to-day developments” with significant price spikes during the past month.
“Many commodity prices will likely correct – the question is how long it will take? This is very difficult to predict in the short-term, underscoring the need for us as investors to extend our time horizon,” he said.
With the increased risk of recession and inflation on the back of higher energy prices in addition to T. Rowe Price’s expectations for weaker economic growth, Mr Jenneke said that the inflation-fighting roles of central banks had been made even more difficult.
“Even in the best of times, trying to avoid an economic slowdown while tightening monetary policy is like trying to land a 747 on an aircraft carrier,” said Mr Jenneke.
“It is very difficult to get the trajectory right and most of the time we end up in recession. It seems President Putin has made the landing even more challenging by throwing in a Category 5 cyclone.”
