There war in Ukraine
it will hold back growth global economy in the short term and will maintain theinflation at high levels for many months. But if it ends quickly, avoiding a military escalation, the expansive business cycle will not be compromised. A recessionwith its consequences on the financial markets, will be able to so be avoided. But warn, Andrea Scauri, equity manager Italy of the Swiss management company Lemanik“the risk profile continues to increase, especially for theEuropegiven its greater sensitivity to inflationary pressures. ”Global equity markets were negative in April on fears of a sharp slowdown in global economic growth fueled by rising energy and commodity prices, the Russian-Ukrainian conflict and from new blocks in China, with repercussions on supply chains. But the greater risk for the stock markets continues to be the less accommodative change in global monetary policy led by the Fed.
“We are in a phase in which the paradigm is changing for central banks, in addition to a very complex geopolitical situation, growing tension between the United States and China, in addition to the Russian-Ukrainian conflict, and this increases the risk of a deterioration in prospects” explains Scauri. For the central banks It has become crucial to fight inflation and markets are already pricing in steep interest rate hikes, a potentially supportive element. Central banks are likely to want to avoid disrupting economic growth achieved by easing the pandemic and that policy is likely to take an accommodative turn, either through yield curve control or the equivalent of a fresh injection of liquidity.
“In this context, we believe that the markets are already pricing in a sharp economic slowdown, that the positioning is already extremely cautious and that equities are still preferable to bonds and are the best hedge against inflation over the long term,” concludes Scauri.
