It’s no secret that a lot has been happening with the stock market lately.
It began with the stock market taking a hit in part due to fears over inflation, but in more recent times, we’ve seen Russia’s invasion of Ukraine have a major impact on global markets.
We know this isn’t getting any easier, so today we’re going to dive a little deeper into the details and explain what’s going on, and what Spaceship is doing.
What is going on with interest rates and inflation?
The market volatility in December and January was sparked by a few things, including the new Omicron variant, the US Federal Reserve’s pivot to end quantitative easing, as well as expectations that they might increase interest rates.
Jerome Powell, the chair of the US Federal Reserve, is still planning to raise its key interest rate this month, however Powell will likely propose a 0.25% hike at this time.
This is designed to help fight the historic surge in inflation, which is “well above 2%”, and looks to be the highest in 40 years.
This would be the first rate hike in the US in more than three years.
But what about Russia and Ukraine?
Oil prices have soared recently due to concerns that Russia’s invasion of Ukraine will impact supply chains, which are already struggling.
Russia is one of the world’s largest producers of energy, and oil prices were already high.
All this caused the price of a barrel of US oil to surge to $130 earlier this week.
Then things changed again when the US and UK announced they would ban Russian oil and energy imports. Oil prices jumped 7% on that news alone.
This caused the stock market to drop, as oil prices impact inflation and are a tax on growth.
So, what does this mean for Spaceship?
Firstly, it’s important to note that we believe we don’t have any exposure to Russian stocks in either our Spaceship Super investment options or our Spaceship Voyager portfolios.
We wanted to make that clear to all customers.
The reason our portfolios are impacted is because of a confluence of events: rising interest rates, inflation concerns, the end of the pandemic and what that means for ‘stay at home’ stocks, and of course, the Russia/Ukraine conflict impacting commodities such as oil and wheat.
When we choose a company for, say, our Spaceship Universe Portfolio, we assess it using our Where the World is Going methodology. That is, we’ll consider whether we believe they will benefit from future trends and are defensible.
If an event such as the Russia/Ukraine war was likely to have an impact on a company over the long term, it might change our investment thesis on the company.
But we don’t make changes to our portfolios based on short term events.
To be a bit more specific, let’s take a look at Airbnb. Airbnb, which is in our Spaceship Universe Portfolio, is down 17.69% since the beginning of the year. It is suffering due to the general downturn in the market, despite showing accelerating sales growth in its most recent results.
It’s our opinion that the Russia/Ukraine war is unlikely to have a direct negative impact on Airbnb. In fact, members of the public are booking Airbnb rentals in Ukraine to help get money to Ukrainian residents, and Airbnb is offering free housing to Ukrainian refugees.
So while that sort of year-to-date drop seems dramatic, our investment thesis on Airbnb has not changed due to what is currently going on, and therefore we believe it still belongs in our Spaceship Universe Portfolio. (Of course, if there were other events that caused our investment thesis to change, that might cause us to remove Airbnb from the portfolio.).
We’re here to help
When it comes to investing, it can pay to hang in there.
We have a minimum suggested timeframe of seven years for anyone holding an investment in a Spaceship Voyager portfolio because, generally, when equity investments are held for longer periods they tend to exhibit lower volatility than those held for shorter periods. (Although, naturally, past performance is not a reliable indicator of future performance.)
Having said that, we know this isn’t easy, so if you have any questions, please do reach out to us — we’re here to help.
The Spaceship Universe Portfolio invests in Airbnb at the time of writing.
Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.
