Publish Date: 17 February 2022
By Tui Eruera
Russia’s invasion of Ukraine is rattling markets globally and pushing oil prices higher. But Tui Eruera, CEO and Founder of Jaaims, a trading platform that uses artificial intelligence to help investors select stocks and time trades, believes the conflict in Europe could have an unexpected flow-on effect.
It’s been a tough few years for the global semiconductor industry. Pandemic-related supply chain disruptions have come at a time of rising demand for personal electronics including mobile phones and laptops.
But the manufacture of microchips is about to hit another roadblock.
Russia and Ukraine are among the world’s leading suppliers of neon gas and palladium – both essential components of the chip process.
In fact, electronic materials advisory firm Techcet says the majority of all high purity neon imports into the US comes from Ukraine . Turmoil in Europe, and related economic sanctions against Russia, will further impact the supply of these inputs in an industry already running on thin capacity.
As a guide to possible outcomes, we only have to look back to 2014 when Russia invaded Crimea, to see how a tightening of supplies led to a 600% leap in the price of neon.
Impact across sectors
The shortage of chips isn’t limited to the tech sector. It has also hobbled the auto industry, with some car manufacturers cutting back the electronic features simply to get vehicles off the production line and into stock-starved dealerships.
The upshot however, is intense pressure on the tech sector. Already this year, we’ve seen the NASDAQ 100 slide from 16,501 at the start of 2022 to 13,458 in mid-March – a fall of 18%.
The Ukraine crisis has seen Jaaims pull out of all tech positions – a move based on the algorithm’s reading of market sentiment and media reports. But here’s the thing. This pullback allows Jaaims to determine how the situation unfolds while freeing up capital to rotate into other emerging opportunities.
An uncertain world demands an active approach
Faced with the current stresses, we could see tech stocks oversold, creating the potential for value buying.
But geopolitical uncertainty isn’t the only factor investors need to weigh up. While we’ve enjoyed a low inflation environment for some time, this is changing globally. Rising inflation is likely to push up interest rates, creating a very different landscape for investors.
This all highlights the value of an active approach to investing. A passive strategy has worked well for investors in the more benign world of the last few years. As we look ahead though, investors who can recognise oversold sectors and undervalued shares with growth potential, are well-placed to benefit in a more challenging trading environment.
This is where Jaaims is proving to be such a useful tool. It delivers data-driven recommendations on which stocks to select, free from human biases. This is a significant advantage in turbulent times when investors can let emotions rather than reason drive decisions.