Markets are now reflecting multiple concerns. February witnessed the shock of a full scale Russian invasion of Ukraine, rather than a Donbas land grab mirroring Putin’s previous tactics in North Ossetia, Abkhazia and Crimea. Due to Ukrainian resistance, Western assistance and poor Russian tactics, Putin’s ambitions have subsequently been clipped out of necessity. However, the sheer scale of the fracture between Russia and the majority of the world’s nations is now laid bare. This has major ramifications for a host of issues from the pricing/supply of energy and food and much more to boot.
Meanwhile, the sheer scale of another disaster is increasingly obvious. Against the most challenging background since the financial crisis, central banks, having believed their own hype and hegemony, are now scrambling to raise interest rates in a vain attempt to extinguish the inflation they are ultimately responsible for and yet, were oblivious to. Metaphorically speaking, this bogey man hasn’t so much sidled out of the shadows as approached from the front with the subtlety of a luminous Russian armoured column ….. and they still missed it. Double digit inflation cohabiting with 1% interest rates represents a level of ineptitude that will likely never be beaten.
We find it difficult to make a case for any helpful economic news riding to the rescue in the near term. However, only enterprises of substance own the possibility of passing on the inflation that is now all encompassing.