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Alternative Market Briefing

Four scenarios of Russia-Ukraine war's potential implications

Thursday, March 10, 2022

Opalesque Geneva:

In its latest Focus report authored by CIO Charles-Henry Monchau, Syz, a boutique Swiss private bank headquartered in Geneva, considers four scenarios.

These scenarios, which have different geopolitical narratives, examine the potential implications of the war between Russia and Ukraine for the global economy and financial markets: (1) a Russian military victory, (2) a negotiated deal between Russian and Ukraine, (3) a Russia-NATO armed conflict, and (4) a coup against Putin.

In the first scenario (medium to high probability), a Russian military victory leads to an unstable Ukraine and to Cold War II. This scenario is a devastating one from a humanitarian perspective. Its macro impact will involve a slowdown of US GDP growth and a mild recession in Europe, high oil and natural gas prices, longer inflation, supply chain disruptions. While the Fed will hike rates, the ECB is unlikely to. From a market impact perspective, "earnings growth should be revised downward by around 10% while equity valuation should not deteriorate further. Global equities could decline by another 5% to 10% while Equity volatility is expected to stay high. In this context, investors are likely to favour defensive quality growth stocks with strong business models, robust balance sheets, high free cash flow generation and pricing power. US equities are likely to outperform the re......................

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