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  • Writer's picturePatricia A. Stewart | CFA

How Is the War in Ukraine Impacting Canadian Investors?

Ukraine may be a world away from Canada, but Russia’s unprovoked attack on February 24 changed the way the world conducts business and has had a huge impact on the Canadian economy. And by all accounts, the war could last for years. This means Canadian investors will need to take proactive steps to protect and strengthen their retirement portfolio.

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What Does the War in Ukraine Mean for Canadian Stocks?

It didn’t take long for the effects of the war in Ukraine to be felt here in Canada. The war disrupted global trade and had an immediate impact on energy and commodity prices. At the same time, the Bank of Canada, Federal Reserve, and other central banks have begun raising their key lending rates to tame inflation. This perfect storm benefits the energy, materials, financials, and agriculture sectors.

In the days leading up to the war in Ukraine, West Texas Intermediate Crude (the North American oil benchmark) was trading at around $93.00 per barrel. By March 8, crude oil had soared to $129.44 per barrel, the highest level in 14 years.

Oil prices rocketed higher because Russia exports roughly 60% of its oil to Europe, which accounts for a third of Europe’s oil demand. The U.S., meanwhile, imports 7% of its oil from Russia. Canada has not imported oil from Russia since 2020.

Sanctions against Russia and threats from Russia that it will turn off its pipelines to Europe has forced energy buyers to look for oil and gas supplies from countries that are more politically stable. Canada is the fourth largest oil producer in the world and is seen as a natural solution for countries looking to build up their oil and gas reserves.

The war in Ukraine is also putting pressure on commodity prices. Ukraine and Russia account for approximately 14% of global wheat production and are responsible for 30% of all wheat exports.

In the opening months of the war, wheat futures more than doubled to their highest levels on record. If Europe can’t get Ukrainian wheat, they’re going to look elsewhere. Canada is the third largest exporter of wheat and is responsible for 14.1% of all exports.

Gold and silver miners and companies linked to commodity demand have also experienced strong growth.

There are big downsides too. Higher commodity prices means it costs more to manufacture food with those higher costs being passed along to consumers.

Against a backdrop of surging inflation, higher food and energy prices, supply chain disruptions, and rising interest rates, the war in Ukraine is damaging consumer sentiment and threatening global economic growth.

The World Bank recently lowered its global economic growth forecast for 2022 to 2.9% from 4.1%. The World Bank also said that most countries should begin to prepare for a recession. It said the big economic downgrade and recessionary fears are mainly due to the consequences of the war.

Why Should You Trust Sharp Asset Management for Your Retirement Planning?

Canada might be insulated from the horrific war in Ukraine, but investors have seen the fallout. The war is not expected to end any time soon, with many Canadian investors asking what they should do about their portfolio?

If you live in Toronto, Mississauga, or anywhere in the GTA and are looking for a portfolio management firm or asset management company that can help you build a diversified portfolio that best suits your investment goals and risk tolerance, Sharp Asset Management can help.

Sharp Asset Management Inc. is an independent portfolio management firm that is 100% owner-operated. Since we are a highly concentrated group of professionals, we can respond quickly to changing market conditions. To learn more about investing with Sharp Asset Management, contact us today.

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