Our investment strategist Stephen Miller shares his thoughts on how tensions and conflict between Russia and Ukraine may impact markets.

Clearly, Russia / Ukraine tensions remain an intense focus for markets, leading to episodic bouts of risk aversion. This has been most manifest in struggling equity markets. Perhaps what is a little different in the current environment is that developed market sovereign bonds are not as effective as a ‘safe harbour’ asset.

For one thing, persistent inflation undermines their attractiveness as a ‘safe’ asset in the current environment and, therefore, their long-assumed quality of a good diversifier for ‘riskier’ assets in a portfolio becomes questionable.

Moreover, with the potential for a further escalation in energy prices and other commodity prices more broadly as a consequence of Russian incursions into Ukraine, inflation could well become a much larger problem.

Click here to read the full piece.