Q2 | 2022

Global Macro Outlook:

an unexpected turn of events

We examine how the Russia-Ukraine conflict might shape macro trends and influence allocation decisions.

Macroeconomic strategy, multi-asset solutions team

A time of change: allocation implications

Just as we were looking to a return to some semblance of postpandemic normalcy, the Ukraine conflict and resulting geopolitical stress have further complicated the macro landscape. The extended disruption to global supply chains and surge in commodity prices mean that major central banks now face the near impossible task of tamping down inflation without squeezing real incomes or dampening growth. While we believe that policymakers' concerns over high inflation will ultimately give way to worries about slower growth, and that a dovish pivot will likely materialize in Q3, the path there isn't likely to be smooth. In this edition of Global Macro Outlook, we outline the strategic macro themes that are taking place and assess their potential implications for asset allocation.



Timeline of select market-relevant events in Q1 that have contributed to our views¹

Timeline

  1. February 21, 2022

    Russia issues a presidential decree recognizing Donetsk and Luhansk as independent states and deploys Russian troops into the region

  2. February 22, 2022

    The United States, the European Union, and the United Kingdom announce sanctions targeting Russian lawmakers and banks after Russia sent troops into Ukraine; Germany halts the Nord Stream 2 gas pipeline project

  3. February 23, 2022

    Oil prices surge, with the international benchmark Brent crude rising above US$100 a barrel for the first time since 2014; the S&P 500 Index slips into correction territory, hitting a 14-month low²

  4. February 26–27, 2022

    The United States, the European Union, the United Kingdom, Canada, France, Germany, Italy, and Japan announce an agreement to remove some Russian banks from the SWIFT financial messaging system to prevent Russia's central bank from accessing its foreign currency reserves to undermine sanctions

  5. February 28, 2022

    Russia imposes capital controls, banning Russian individuals and firms from transferring funds abroad, including fund transfers to service foreign loans; Switzerland breaks its 207-year policy of neutrality by adopting sanctions that the European Union has imposed on Russian entities

  6. March 8, 2022

    Russia introduces export bans on covering various sectors (e.g., agriculture, medical) until the end of 2022; the European Commission reveals plans to reduce European Union member states' dependence on Russian energy

  7. March 16–17, 2022

    The U.S. Federal Reserve raises interest rates by 25 basis points and signals that there could be six more rate hikes in 2022; the Bank of England raises interest rates by 25 basis points for the second time this year

1 Based on events that have taken place as of March 31, 2022. Bloomberg, as of March 23, 2022.

Previous editions of Global Macro Outlook



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