Oil prices hit a high of $116 last night, as attacks on oil facilities across the Middle East continued over the weekend. This settled at around $110 after it was announced that G7 finance ministers would meet to discuss whether to tap emergency oil reserves to prop up the oil supply temporarily.
Member countries of the International Energy Agency hold enough in strategic reserve to cover nearly a month of their total oil demand or over 140 days of net imports, and discussions to release 25-30% of the reserve are currently underway. Gas and fertiliser prices have also continued to rise as significant supplies typically come through the Strait of Hormuz, which is effectively closed whilst the war continues.
Japanese and Emerging Market equity markets have been hit the hardest so far, given their dependency on imported energy, but with some profit taking also presumably at play here, given that both markets were up c.30% in recent months. US equities are down 1% at the time of writing and flat over the year so far.
Government bonds, particularly gilts, have sold off, as investors race to price in the increased prospect of rate hikes by central banks, but corporate credit spreads remain fairly constrained so far.
What does this mean for your portfolio?
Our view remains that the current volatility does not warrant changes to long-term strategic asset allocations. Our investment team at Gallaghers are closely monitoring market conditions and engaging with managers to identify any idiosyncratic risks within portfolios.
We’re keeping an eye on portfolio drift vs strategic weights. We will be in touch should any action be required for your portfolios.
Please feel free to get in touch if you have any questions or want to discuss in more detail.
This communication is for information purposes only and does not constitute financial advice. The value of investments and the income from them can go down as well as up, and you may get back less than you invested. Past performance is not a reliable indicator of future results. Lathe & Co is authorised and regulated by the Financial Conduct Authority.
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