Stocktake: Markets more worried by ‘war on inflation’ than Ukraine

How worried are investors by the ongoing Russia-Ukraine conflict? Geopolitical problems pose more of a risk to financial market stability than at any time since January 2020, according to Bank of America's latest fund manager survey.

That said, only 7 per cent rated the conflict as the biggest tail risk to global markets. Investors are more bothered by the possibility of hawkish rate hikes (41 per cent), inflation (23 per cent), asset bubbles (11 per cent) and global recession (8 per cent).

History suggests fund managers may be right. Stocks usually take geopolitical events in their stride, says LPL Research. Looking at 22 past instances, it found the average drawdown was just 4.6 per cent. On average, it took less than 20 days for markets to bottom and 43 days to recover all losses.

When stocks do sell off, they tend to be buying opportunities, notes investment blogger Urban Carmel, with indices posting unusually strong one-, three-, six- and 12-month returns.

Stocktake: Retailers can buy loyalty with stock

---

Stocktake: Tech stock recovery looks ‘unhealthy’

---

Stocktake: Are Meta shares cheap?

---

Stocktake: Wild swings in tech stocks spook investors

---

This is echoed by Deutsche Bank. In a note last week, it said sell-offs tend to be fleeting affairs. A year later, indices posted average gains of 13 per cent.

Of course, no two events are the same, so no one knows how markets will respond in the coming weeks and months. Overall, however, CFRA Research's Sam Stovall suggests stock markets "are more at risk from the war on inflation" than any war in Ukraine.