Too much stimulus sets our human brains spinning. To be fair, previous similar crises in geopolitics rarely let us look at the cards so soon. Take the Yom Kippur war in 1973, which lasted ‘only’ 19 days. Do you honestly think anyone would have been able to foresee the meaning for the long run 18 days into the conflict? Who could have predicted the oil embargo, the subsequent recession, and the far-reaching consequences of high inflation into the 1980s? Or take 9/11: would anyone have foreseen on 29 September 2001 that Iraq would be invaded and that the domestic stimulus in the US would drive the biggest housing bubble on the planet? I would agree with Mao Zedong (or, according to some, Zhou Enlai) when he said in 1972 it is “too early to judge” the impact of the 1968 protests (not the French revolution as is often misquoted – this would be stretching the concept indeed).

Shorter-term impact

Hence, we suggest leaving considerations for the long term to a hopefully more peaceful day sometime in the months ahead. For now, we focus on the shorter-term impact. We revised the commodity stance up immediately after the war started in February. Now we follow by revising global growth projections down and inflation up. However, we do not reverse the expected pattern: the inflation bulge will just be sharper before it tapers off into summer and so will the growth slowdown.

Conclusion for investors

China is in the spotlight when it comes to countering the global headwinds, as policymakers there have done in every single crisis before. If they keep holding back, Chinese risk assets will keep underperforming. On the energy front, we see a quicker response. Europe is building on liquefied natural gas and – to a lesser extent – on clean energy to reduce its dependency on Russia (see number of the week).

Number of the week