Issue 8 – If It’s Too Complex To Follow, Follow Bond Market for Orientation

The Snapshot of the week:

The Ukraine situation slammed into the markets at a time when uncertainty was already rife, thanks to eye-popping inflation prints and the Federal Reserve’s acceleration towards tightening policy. With a whole range of risky assets, including oil and commodities, looking vulnerable to either higher interest rates or slower economic growth, investors have turned to gold as an old haven. It’s a bit counter-intuitive, because the yellow metal usually doesn’t jive well with the prospect of rising bond yields. The warning of a possible land war in Eastern Europe is causing severe diplomatic tension among Nato members and between Nato and Russia. The geopolitical picture is awful. Western officials and Nato have contradicted Moscow’s claim of troop withdrawals on the Ukraine border, evidence on the ground indicating that Russia is moving toward an imminent invasion. The market mood brightened on Friday as Washington and Moscow agreed to hold talks about the Russia-Ukraine standoff, but while a favourable development, it was not enough. Moscow-backed separatists in eastern Ukraine announced plans for mass evacuation of civilians to Russia, while the latter was making plans for nuclear drills to test ballistic and cruise missiles. This situation has proven difficult to ignore.

 

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By Hubert Marleau

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By Hubert Marleau

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