As recently as the beginning of February, a total invasion still seemed unlikely. Since then, we have chosen to position for a potentially binary outcome, and have increased exposure to gold, the USD, the YEN, and the CHF, as well as to some commodities such as oil, while cutting our exposure to financials, reducing our equity exposure, and adding protection.
We believe that that global recovery from the pandemic will not be fully derailed. For Europe, we could still see GDP growth above 3% for 2022. The US economy is less exposed to Russia, although we expect the Fed to hike several times before the end of 2023. Economies dependent upon wheat are likely to be more severely impacted.
Armed conflicts have not historically had a lasting effect on financial markets, unless they led to an energy crisis – which is the outcome at stake today.

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