Russia’s war in Ukraine has certainly cast a pall over global financial markets in short order. The shocking development also greatly complicates the global economic outlook since it comes as much of the world is still fighting the pandemic and dealing with a fragile set of conditions on multiple fronts.
From an investment standpoint, we at Maple Capital are contemplating a host of issues that continues to evolve:
- Geopolitical risk that will remain elevated no matter when the actual fighting ceases
- Supply chain constraints that now become even more challenging and persistent for many industries (see chart below for perspective)
- Commodity price surges and shortages that will likely persist, particularly agricultural and energy commodities
- Inflation pressures that will likely now prove more pervasive and durable
- Unintended consequences of sanctions and other economic measures being used against Russia, such as the long term implications for the U.S. Dollar as the global reserve currency
- Heightened volatility in financial markets that could erode investor sentiment
- Higher risk premiums in financial markets that are eroding financial conditions, albeit from extremely favorable conditions (see prior Commentaries)
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