Russia’s invasion of Ukraine has numerous implications for the global economy and investments over the long haul.
One significant impact has been to emphasize the extremity of natural resources cycles—from abundance to shortages, booms to busts, and back again—and the global need for those commodities. Access to natural resources—particularly food and energy—is essential to any country’s national security, which can be dramatically affected by shortages.
The war has created global shortages for several key natural resources from oil to wheat to precious metals essential to the green revolution. And now countries around the globe are scrambling to resolve those shortages. Historically, this has proven an opportune point for investors.
The war appears to mark the start of a shortage phase, which encourages extensive global investment in numerous resources, including oil, natural gas, nuclear energy, wind, solar, agriculture (wheat, corn, soybeans, etc.), copper, zinc, nickel—the list goes on. This investment surge could last six to eight years if the global economy continues growing, and for energy and some essential “green” metals, the boom could last for decades.
Bottom line: Investors should consider tilting their equity portfolios toward value stocks in natural-resource sectors. Historically, these equities, while volatile, have also provided a reasonable hedge against inflation and generated reasonable dividend income.