"One thing we can all do, however, is staying calm to avoid financial self-harming."
Philip Hanley, director at Philip James Financial Services, took a similar view.
He told clients: "Share prices the world have been falling since the beginning of the year for reasons other than Putin and Ukraine.
"It’s inflation, rising interest rates and the possibility that governments might not pump as much money into their economies as a result, that's been worrying the money men.
"The view of fund managers is still that investments will recover this year. The money coming out of shares has to go somewhere, and if you're in medium risk funds, that 'somewhere' has already cushioned you from the worst.
"What goes down does go up again if you hang on in there, which, of course, is our advice."
Cash converter
But one adviser who is urging a flight to cash is Brian Dennehy, who was quoted in the national press at the weekend (February 26) stating that he recommended a shift to 50 per cent cash as a defensive position.
Talking to FTAdviser Monday (28 February), Denney explained his positioning: "Most of the commentators trot out the same stuff that they have been programmed to say for years.
"I won’t go into detail with that critique, but the investment industry generally is too full of cheerleaders, and this is dangerous for clients and independent advisers alike.
"Advisers are key in our industry as the great majority really care about their clients. They must think independently in times such as this, and not be seduced by wider industry complacency built on a 40 year bull market, and no experience of a secular bear market."
He said his shift to defensive investments was not just about the war in Ukraine but a "mix of dangerous cross-currents for which I know of no precedent in financial history".
Dennehy listed these, stating that before the pandemic hit markets in February 2000, these five factors already existed:
- Stock market valuation bubble in the US.
- Investor mania, centred on the US but also global.
- Global debt mountain, of uniquely poor quality.
- A 33-year policy error supporting the stock market in the US
- A 10-year policy error, emergency rates/quantitative easing, in the US and globally.
He said: "The last two are primarily errors of the US central bank, the Federal Reserve, and then kept feeding the first three elements. Investor complacency grew and grew, as did that of the investment industry.
"Each of these five was unique in scale. Combined, there is no historical precedent for this mix of market vulnerability.
"This vulnerability is like the avalanche-prone snowy slope. We just await the final snowflake – albeit of unknown timing."
Added to this is the pandemic, the rising cost of living, the energy crisis and now the war.
Dennehy added: "It is a matter of simple risk and reward. The risk is down 50-80 per cent for the pivotal US stock market. In contrast, the immediate reward for staying invested is a few per cent of upside.
