The recent Russian invasion of Ukraine has significantly heightened the stock market volatility across the globe. Investors continue to watch the war-related updates closely to find out how they could affect their stock portfolio. In my opinion, it’s nearly impossible at the moment to accurately predict which companies the Russia-Ukraine crisis will affect the most and to what extent. However, Canadian investors can take cues from the recent developments and adjust their stock portfolio accordingly to safeguard their hard-earned, invested money. Let’s find out how.
Russia-Ukraine war is intensifying
On February 24, the Russia-Ukraine war started after Russian president Vladimir Putin announced the launch of a large-scale invasion of Ukraine. Following this, several Western nations, led by the United States, started imposing unprecedented economic sanctions on Russia while severely criticizing the Russian invasion. The ongoing war and economic sanctions sparked concerns about oil supply, as Russia is one of the largest oil-producing nations. These concerns are the main reason why oil prices have shot up by more than 20% in the last three sessions alone. Early on March 3, the WTI crude oil futures prices hit their highest level since 2008.
In retaliation to these sanctions, Russia has closed its aerospace for 36 countries, including Canada, Norway, Poland, Portugal, Romania, France, Spain, and the United Kingdom. Similarly, the U.S. and many of its allies, including Canada, have already announced the closure of their airspace for Russian flights. These factors will impact airline companies and worsen the already struggling supply chain disruptions.
Which stocks to avoid?
Amid fast intensifying geopolitical tensions, it would be wise for stock investors to adjust their portfolio right now and avoid sectors that are highly sensitive to crude oil prices and the global supply chain.
As I noted above, both surging oil prices and multiple airspace bans would badly affect the airline industry and increase their costs. That’s why I’d avoid buying aviation and airlines stocks at the moment. While these factors could also affect several companies from the retail and other sectors, investors need to pay attention to the potential impact of the Russia-Ukraine crisis on a specific company.
For example, the Canadian auto parts company Magna International (TSX:MG)(NYSE:MGA) operates about six manufacturing facilities with roughly 2,500 employees in Russia. While the company recently confirmed that its manufacturing facilities haven’t been affected by the war yet, investors still remain worried. This is one of the reasons why Magna International stock has already lost 8.4% of its value this week so far, after posting an 8% drop in February.
Which stocks to buy now?
I wouldn’t recommend selling stocks based on the Russia-Ukraine conflict-related developments, as the situation continues to change at a very fast pace. Nonetheless, investors could add some reliable high dividend stocks to their portfolio right now with strong fundamentals. For example, investors could consider buying dividend stocks from energy infrastructure and financials sectors like Enbridge, Pembina Pipeline, and Toronto-Dominion Bank. Their strong and consistent dividends could minimize your risk exposure amid the ongoing geopolitical uncertainties.
