Over a month has passed since the start of the conflict in Ukraine and, following the initial volatility swings across all segments, markets have been more constructive in the past few weeks. Rates have drifted higher, reaching 2.5% for US 10 year Treasuries, amid expectations of more aggressive monetary action. Equities are returning to pre-conflict levels, while commodities are still volatile but running cooler overall.
While negotiations between the parties involved in the conflict may have reached a stalemate, market attention has shifted toward issues concerning the current inflationary environment and how central banks are expected to react. The Euro area annual inflation rate in March reached 7.5%, up from 5.1% in January. Likewise US inflation almost skimmed 8% in February, its highest level in 40 years, albeit within a sturdier economic environment than in Europe.
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