Looking back at the Russia-Ukraine conflict, strategists have consistently recommended the current best strategy: cash is king!

Caixin March 11 News (Editor: Ma Lan) As the conflict between the United States and Iran continues, the oil market, stock market, and commodities market remain highly volatile. Investors are struggling to find safe havens, but the challenges are increasing.

Several investment bank strategists reviewed the situation when the Russia-Ukraine conflict erupted in 2022 and recommend that investors adopt the same investment strategies now. Goldman Sachs’s strategist team recently stated that holding cash and buying call options can both protect investors from losses and allow them to benefit from stock market gains.

Goldman Sachs also pointed out that the outbreak of conflict with Iran, combined with last Friday’s disastrous February employment report in the U.S., has shattered investors’ hopes for a return to a golden period for the U.S. economy this year.

Additionally, rising energy prices may force the Federal Reserve to pause further rate cuts. Recently, bonds and stocks have been sold off simultaneously, and the relationship between stock prices and oil prices has sharply turned negative, meaning rising oil prices will immediately pressure the stock market. This dynamic is quite similar to the early stages of the Russia-Ukraine conflict.

Based on this, Goldman Sachs recommends a more conservative investment approach, reducing stock allocations and increasing cash holdings in the next three months. Meanwhile, investors can use call options to seek upward opportunities.

Where is the “bottom”? Apart from Goldman Sachs, Deutsche Bank also advocates a “cash is king” strategy, adding that during the outbreak of the Russia-Ukraine conflict, diversified portfolios of stocks and bonds recorded the worst annualized returns in decades.

On Tuesday, U.S. stocks rebounded somewhat amid a sharp drop in oil prices, but the Chicago Board Options Exchange Volatility Index, also known as the “Fear Index,” remained high, indicating market pessimism. In such a situation, some analysts have suggested that the best approach is to “stay put.”

Jeffrey Yale Rubin, president of independent stock market research and investment firm Birinyi Associates, pointed out last week that although stocks typically decline in the weeks following U.S. involvement in conflicts or other geopolitical shocks, prices often rebound quickly afterward.

Goldman Sachs also made a similar prediction, suggesting that the U.S. stock market is likely to enter a correction zone soon. Investors can use their extra cash to buy on dips once the market stabilizes.

However, some cautionary voices warn to remain cautious. Rajeev De Mello, Global Macro Portfolio Manager at Gama Asset Management SA, emphasized that the lesson from 2022 is that investors should not buy on dips immediately, as further declines are still possible.