Here’s What Investors Say as Crisis in Ukraine Intensifies
(Bloomberg) — As the conflict in Ukraine deepens and the fallout from increasingly tough sanctions on Russia reverberate through global markets, investors are rushing to keep up.
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Safe havens like bonds, gold and the U.S. dollar rallied on Monday, while classic risk-sentiment proxies like the Australia dollar tumbled. Emerging market currencies also came under pressure, with the South African rand and the Turkish lira sinking. U.S. and European equity futures tanked. Crude oil surged.
Investors face soaring global commodity prices on top of already elevated inflation and slowing global growth after the pandemic recovery. They’re also trying to get a handle on how central banks may recalibrate monetary policy to meet the challenges.
Here is what a selection of strategists and investors have to say on the unfolding situation across asset classes.
No Time to Buy the Dip
Saxo Capital Markets is keeping a defensive stance on equities and sees continued upside in energy, mining and commodity stocks.
“It is probably not time to buy the dip, yet be selective and consider stocks and markets that could benefit from geopolitical tension worsening and commodities rallying,” Jessica Amir, a market strategist in Sydney, wrote in a note.
Amir expects U.S. equities to fall further given “there is so much uncertainty in the air,” and “inflation is at multi decade highs, and set to get worse.”
Hit to Growth
GAMA Asset Management has raised some of its hedges by selling the euro following the increased sanctions by the West on Russia, said Rajeev De Mello, global macro portfolio manager.
“Higher energy prices will affect European growth, and confidence will be shaken. The ECB will be slower to normalize its monetary policy than other central banks.”
‘Impotent’ Central Bank
Russia’s central bank may become “impotent” in defending the ruble if sanctions are successful, according to National Australia Bank strategists.
“While not entirely clear as yet exactly what it means in practice, Russia’s central bank (CBR) has been sanctioned with the intention of denying it unfettered access to its ($643bn worth) of FX reserves,” Ray Attrill, head of FX strategy, markets, wrote in a note. “If CBR can’t access reserves, it can’t defend the RUB from free-fall.”
Hard Monetary Decisions
“From a monetary policy perspective, this conflict implies a further deterioration of the already tricky growth-inflation trade-offs central banks have been facing, making the upcoming decisions particularly hard,” Silvia Dall’Angelo, senior economist at Federated Hermes, said in a note.
“In the current environment of already high inflation and concerns about second-round effects, central banks will likely continue to remove monetary stimulus,” she said. “But downside growth risks from the geopolitical backdrop mean that they are likely to proceed gradually and cautiously. It is fair to say that the crisis increases…
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