The man who oversees billions being invested for Dundee finance firm Alliance Trust feels inflation is more of a risk to stock prices than the Ukraine conflict.
The FTSE100 tumbled almost 4% on Thursday as Russia invaded Ukraine. But the market recovered almost all the ground on Friday.
Craig Baker, global chief investment officer of Willis Towers Watson (WTW), which operates Dundee investment house Alliance Trust’s portfolio, is keeping a close eye on developments.
He said: “Our initial assessment is that it is unlikely it will result in large and persistent issues to global asset prices.
“We remain of the view the impact is likely to mostly be to Russian rouble and Russian assets in the short term.
“That’s not to say volatility won’t increase, it will.
“But volatility has been very low for quite a few years – this is just going back to normal.”
Inflation bigger risk to asset prices
The finance expert said there were several scenarios of how the conflict could play out in global markets.
“There could be higher energy and commodity prices, a reaction from China to Western sanctions and potential for further conflict.
“Any of these things could happen.
“In the Crimean crisis (in 2014), it hit Russian assets short term but not for very long and it didn’t impact the Eurozone or world indices at all.
“We think that’s most likely to be the case, subject to evolution and we’ll continue to watch.
“There are more likely to be issues on markets with inflation than the Russian crisis.”
Plans to keep increasing dividends
Mr Baker made the comments as Alliance Trust revealed its annual report for 2021.
It shows the company’s total shareholder return last year was 16.5%.
The performance was around 1% below the company’s benchmark index after a disappointing fourth quarter.
Alliance Trust has increased its dividends to investors for 55 years and there was a large rise in distributions last year, by 32.5%.
Chairman Gregor Stewart said the company intends to keep increasing its dividends to shareholders.
He said: “Against the backdrop of new Covid-19 variants, increasing inflation and a few large technology companies dominating returns, this was a robust result although behind our benchmark.
“A significant increase in dividends was introduced for the third and fourth interim dividends.
“From here, we expect to continue extending our 55-year track record of annual dividend increases.”
Apple and Tesla impact
The majority of the underperformance against the benchmark was put down to Alliance Trust having no holdings in popular tech stocks Apple and Tesla.
Mr Baker said the shares were not in any of his stockpickers’ “20 best ideas”.
He said: “Apple has done very well from the stay at home situation. Tesla has since gone down by a third this year.
“Tesla was being valued at more than all the other auto makers put together… I think its valuation went beyond what’s appropriate.”
Alliance Trust intends to hold its AGM in person this year, at Apex City Quay Hotel on April 21.
