The feel-good time on the stock exchanges is over. In times of crisis, investors are afraid. The Ukraine war is pushing investors into safer havens. The world is in turmoil, including the world of investors.
Every hour you get new news about the war in Ukraine and the massive impact on the world economy. Fear is raging on the stock exchanges. Private investors fear for their investments.
The sensitivity of the markets to geopolitical crises was evident immediately after the Russian invasion of Ukraine. Stock prices around the world fell sharply. Since then, investors have been reorienting themselves and looking for safe investments. Check Bitcoin Prestige to get a piece of detailed information about bitcoin trading.
One thing is sure: anyone investing in the capital market now needs strong nerves. It has been a long time since the imponderables were as great as they are now. These four points show how tense the market situation is at the moment.
1. Haven: investors flee to gold
Gold is a sought-after investment in times of crisis, and this has not only been known since the Corona pandemic. The Ukraine crisis is also driving the price of gold up: in February alone, the gold price in dollars rose by a good seven per cent and was last quoted at around $1,933 per troy ounce (around 31.1 grams). Despite the strong dollar, some analysts even believe that gold can break the US $2,063 per troy ounce from summer 2020.
A rise in the price of gold is considered an indicator of nervous markets. The precious metal price behaves counter-cyclically to the course of share prices. Gold has been considered a crisis currency in depots for decades. The precious metal has established itself as a protection against inflation, geopolitical risks, and cushion fluctuations. Investors are now hoping to hedge their portfolios with gold investments.
2. Cryptocurrency prices rise
The situation is similar to cryptocurrencies. The industry leader Bitcoin has risen by a good eight since the Russian invasion a week ago and was last listed at 41,400 US dollars. In the second and third row, Cryptocurrencies also rose sharply, the Terra-Coin Luna even by 40 per cent. Cryptocurrencies thus gained more ground than gold.
Some crypto fans see the current performance as confirmation that Bitcoin and Co. are suitable as a crisis currency and investment counterpart to gold. At least currently, some investors seem to interpret Bitcoin as a store of value. However, it has been shown again that investors are using the growth in cryptocurrencies to take profits. Compared to the previous day, the cyber currencies are red.
It will be interesting to see how investor sentiment develops. The so-called “Fear and Greed” index provides information about this. Most recently, the index was 26 out of 100 and thus more in the neutral area. The lower the value, the less likely the price will fall further because people are willing to sell. Investors have already divested their positions.
However, the index has been falling again for a few days – it remains to be seen to what extent investors should still rely on Bitcoin and Co. as protection. Despite the current price growth, one must not forget: Compared to gold, which has developed into a crisis currency over the centuries, Bitcoin can look back on a relatively young history. It is not yet possible to analyse how the crypto courses will hold up in times of crisis in the long term.
It is also exciting: Not all crypto coins are in positive territory. For example, cryptocurrencies such as Cardano, Polkadot and Dogecoin suffered more price losses in the past month than the US stock market index Dow Jones.
3. The fear barometer points to turbulent times
The feel-good time on the stock exchanges is over for the time being, according to the VDax volatility index. It is a kind of stock market fear barometer. In the last month alone, it rose by almost 74 per cent. The Dax is developing opposite to the leading German index, the Dax, which has fallen significantly in value. Since the beginning of the year, the fall has happened due to concerns about interest rates. In addition, it is because of the ongoing Ukraine conflict.
The higher the VDax rises, the more nervous investors are – and the more turbulent the markets are. Then there is an increase in sometimes large-volume share sales, which depresses prices. But, of course, the index does not allow statements about an imminent price drop. After all, he’s not a crystal ball.
However, investors still seem relatively stable compared to the first corona wave. In spring 2020, when the pandemic began to spread around the world, the VDax shot up to 99 points. It was a good 60 points above the current level.
4. MSCI World Index: Investors’ darling is under pressure
Exchange-traded index funds (ETFs for short) have become popular. They promise investors an uncomplicated and widely diversified investment. They passively replicate an index.
The MSCI World Index, in particular, is of great interest to investors. They’ve done well in recent years. The index has increased in value by a good 40 per cent in the last four years. Especially with the start of the stock market rally shortly after the pandemic outbreak, it ensured solid returns.
For several months, however, the chart has been pointing downwards. The MSCI World Index has lost a good five per cent of its value within three months. It is primarily because of the construction of the index. Although it is often referred to as the world stock index, it ultimately has a high US concentration and does not cover most countries.