Summary:
• “Gold is everyone’s best friend…” • Inflation: cause and effect on major industries • Food and renewables • Long term trends
5-minute read
On Tuesday 8Th March 2022, Tom Pelc, the Chief Investment Officer here at Fortu, held a webinar depicting the current stock market and economic trends amid Ukraine and coronavirus unrest, spotlighting the extended market weaknesses.
Post commencement of the pandemic, the stock market has seen the highest demand surge in commodities of the last 75 years, highlighted by the evident uptrend in gold and rare earth metals. The cause of their popularisation is quite simple – fear; as gold is frequently used a cushion, when recompensing creditors or simply as an alternate store of value to be used by central banks and affluent individuals. Just in 2021 alone, China’s gold consumption rose by 56% (Goldhub,2022), urging even countries like Poland to double their gold reserves. Rising to the all-time high of £1,553.35 an ounce on Tuesday 8th March from £1097.51 pre pandemic in December 2019 (Gold.co.uk, 2022). Does this trend seem to be slowing down? Not for any time being. Turbulent geopolitical tensions between Russia and Ukraine may incentivise fearing investors to lean on gold reserves further which, in accumulation with persistently high inflation, will support gold price spikes.
Historically, decade inflation is typically as high as 30%, nevertheless, in the last 10 years, it was only 14-15%, showing a general trend in disinflation, a tendency induced by recurring economic crises such as the 2008 Global Financial Crisis, 2014 Russian Financial Crisis and coronavirus implications. With the introduction of the geopolitical crisis between Russia and Ukraine, inflation rose 7.9% in February alone (CNBC, 2022) - a record high in the last 40 years, signalling at an array of implications for the food and energy industries.
This is due to the intrinsic interconnectedness of global economies, as Russia was a major commodity supplier not only to Europe, but the world. As well as being a primary supplier of natural gas and crude oil to Europe, it also supplied vital industrial metals such as nickel, aluminium and palladium, materials used in anything and everything from cans and kitchen foils to car batteries and aeroplane parts. To exacerbate the situation, both Russia and Ukraine are major wheat exporters, while Russia and Belarus are big in potash, an input into fertilisers. The prices of these commodities are rising expeditiously, with a barrel of oil surging over $117 (Statista, 2022), fearing supply shock for Europe in terms of both resources and food.
There are, of course, other reasons for the inflation rate rising in Europe such as wage related factors nevertheless; the key issue for affluent individuals in the present circumstances is the preservation of wealth in an inflation environment, evoking questions regarding stability and sustainability, such as - how do we maintain food security?
A problem posed decades ago by the quickly growing world population, researchers have found many meat alternatives for everyday consumers in none other than - bugs! Sounds delicious, right?
On a serious note, insects are more efficient to farm than livestock as they require less space and resources, making them negative carbon producing. In relation to flavour, insects have the ability to take on any taste the farmer may feed them, establishing insects as a suitable protein alternative even for the pickiest eater and introducing them as a potential financial opportunity, given the ongoing assumptions. You can find out more about this on the Fortu website investment basket.
When investing, your capital is at risk.
Consequently, with commodity prices soaring, renewables once again prove to be the solution for both financially and climate sustainable growth. Cultivation of assets in renewables now goes far beyond the preface of establishing green credentials, as our collective transfer onto environmentally friendly sources of energy is vital to ensuring the prosperity of the future. More about this on the next Fortu article.
When investing, your capital is at risk.
To continue with the long-observed trends in the economy, despite the 6.7% loss in annual GDP in 2020 alone, crypto currency, unsurprisingly, arises as a growing market in the economy. Unlike most items in the market, Bitcoin took only 12 years to reach $1 trillion market value in February 2021, reaching highs of £49,393 per Bitcoin in November 2021 (Coindesk, 2022), thus confirming it is here to stay. Another prediction that could be made is that, in the next 10 years, Artificial Intelligence technology will be the main contributor to GDP growth, making that one of the reasons for Pelc to include AI technology in one of Fortu’s Fintech investment baskets, similarly, more about which you can discover on the Fortu website.
The key takeaways from the webinar held by Pelc can easily be summarised by one word – volatility. Although trends observed from previous wars induce ‘safe to presume’ assumptions, such as equity trading booms, the volatility of the world’s current affairs and their turbulent turnaround, signals to investors to sit tight and observe, as events unfold.
When investing, your capital is at risk. The value of investments can fall, and you may get back less than you invested. Fortu does not provide financial advice.
Next up: ““Low carbon lifestyle to save and make money”
