Wars are common

The current conflagration in the middle east and the resultant uneasiness in the markets are commonplace. Both, the occurrence and the impact on markets in the very long term is not permanent. While this may sound very cynical and cold hearted the usual worries about commodity price inflation, interest rate hardening and the inevitable question on the impact on the global economy is temporary.

We have seen the impact of a longer than expected conflict up north between the Ukraine and Russia so far. While it appeared to have caused significant uncertainty and reason for worry on global trade, it has not taken the proportions of trouble it had assumed at the start of the conflict. Tremendous harm to civilians, untold miseries for the people involved in the conflict are hardly the matters that permanently affect markets. This cold assessment neither belittles its human tragedy nor elevates market behavior. Just states facts.

Financial markets will reprice the risks and move ahead. If the cost of capital increases in response, so be it. It will be incumbent on market participants to analyze the development and incorporate the higher cost of interim capital in their models. Valuations in asset markets will be affected to that extent. However in longer term the world economy will continue to soldier on, pun not intended.

We view this period with significant alarm for the near term and raise the possibility of risks in asset markets. Portfolio adjustments may need to be taken on an individual basis to account for cash flow concerns and near term liabilities.