George Lagarias, Chief Economist at Mazars, said: “The result in failing to predict Russia’s invasion has been further upheaval in the equities market, where volatility (if extrapolated to year-end) would reach that of the Euro Crisis. At the heart of this crisis is not the financial system like 2008. Instead, it’s the global commodities markets. Errant commodity prices exacerbate inflation and put pressure on all asset classes.
“Sanctions on Russia are taking an enormous toll on western markets. Volatility for stocks and bonds is one thing. But commodities markets are experiencing serious dislocations. As a result, global markets are trendless and in desperate search of a paradigm- and leadership. The Fed, the world’s de facto central bank and the organisation everyone is looking to, may now persist that inflation is its primary mandate, but it surely knows it can do precious little to stop prices rising due to shortages. The nature of this crisis is so unique, that it may even have to consider new tools, like Quantitative Easing was in 2008.
“The simultaneous fall of stocks and bonds coupled with crippling volatility in the alternatives space confirms that we are living through another systemic event. The quicker investors and policymakers realise that, the more contained the consequences. But every day that passes when the Fed is focused on inflation it can’t contain and developed market governments worry about debt and fiscal outlays, is a day when a systemic problem is getting worse. That day will eventually cost billions of freshly printed money and prolong any sort of return to market normality.
“Investors should be on the lookout for policy announcements soon, lest the Great Commodity Crisis seriously threatens both investment portfolios and cash.”