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Aviso Wealth’s Perspective on the Ukraine-Russia Crisis

Special Market Update

The Current Situation 

Russian forces have now attacked Ukraine, launching missiles, artillery fire, and air strikes. Ukraine and its Western allies have described the current situation as a full-scale invasion. This crisis is expected to have a mounting human and global security cost and has also roiled financial markets.

Market Update

  • The current situation has precipitated greater “risk-off” sentiments in financial markets, with risk assets in particular hit hard. Global stocks and equity futures have been negatively affected, while safe havens such as sovereign debt have seen greater investor inflows.
  • The flight to safety saw the 10-year US Treasury yield touching 1.86% early in the trading day.
  • Commodities prices have surged, with Brent crude climbing to over US$105 for the first time since 2014.
  • The effect of the invasion started out as a global story for markets, with the S&P 500 Index initially declining 2.3%, the S&P/TSX Composite Index down 1.5%, and the FTSE 100 Index down 2.6%. However, as the trading day in North America and Europe progressed, the story shifted to become more regional, with the S&P 500 Index recouping its morning losses and the Dow Jones Industrial Average and Nasdaq Composite Index making gains during the day. However, the FTSE 100 Index declined 3.7% for the day. Mega-cap tech stocks have started a recovery process, favoured by investors as a proxy for safety.


  • Russia is a key global exporter of various commodities, and not just for oil and European gas. The country also produces 37% of the world's palladium, which is essential for global automobile manufacturing. The conflict could affect semiconductor supply chains, which was a challenge throughout the pandemic that had only just started to ease. Many of these commodities recently started to rally, pricing in near-term supply premiums in light of expected geopolitical risks.
  • ​​​​​Europe’s dependence on Russian energy could send inflationary pressures higher due to the targeted sanctions against Russia, with the potential for causing energy shortages in the E.U. Although E.U. exports to Russia are small, higher energy prices or shortages could slow economic growth in the former region by decreasing production.
  • European equities may be more vulnerable to underperformance versus global equities given geographic proximity. Aviso Wealth has observed an improvement in global equities intraday as the market reassesses these implications.
  • The commodities complex of importing countries in the emerging market world could face some tail risks due to a surge in oil, wheat, and other commodity prices.
  • Central banks will reconsider the path of policy tightening in the coming days and weeks.
  • The European Central Bank could look to slow its withdrawal of stimulus but may be in a difficult situation given prospects for higher inflation coupled with a deceleration of economic growth, which makes for uncertainty in monetary policy. Growth in the region has finally picked up following years of muted growth, so the ECB may be more hesitant to disrupt it.
  • On the U.S. side, it is uncertain how the U.S. Federal Reserve will respond. The prospect of higher prices means that consumers’ purchasing power will be directly hit, which would by extension automatically curb demand. However, rising wages have been a concern that the central bank will have to consider when deciding on the appropriate pace and speed of policy tightening. Currently, the market has repriced for one rate increase in March, relative to two weeks ago where the Fed funds futures market was pricing in two rate increases.

It Pays to Stay Invested

While geopolitical tensions cannot be ignored, historical data show that geopolitical events typically result in market dislocations that are temporary. At this time, we see the impact of the current conflict as being regional in nature. However, the situation remains quite fluid which could result in tail risks from a global economic perspective. Macroeconomic and geopolitical factors will dominate for some time. Until these factors stabilize, we should expect a high degree of daily volatility. As such, our belief in having a balanced portfolio with diversified exposure to growth, value and quality remains strong.

Mutual funds are offered through Credential Asset Management Inc. and Qtrade Asset Management (a tradename of Credential Asset Management Inc). Mutual funds and other securities are offered through Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc.

Aviso Wealth Inc. ('Aviso') is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and The CUMIS Group Limited. The following entities are subsidiaries of Aviso: Credential Qtrade Securities Inc. (including Credential Securities, Qtrade Direct Investing, Qtrade Advisor, VirtualWealth and Aviso Correspondent Partners), Credential Asset Management Inc., Credential Insurance Services Inc., Credential Financial Strategies Inc., and Northwest & Ethical Investments L.P.

The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes, and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. This document is published by CQSI and CAM and unless indicated otherwise, all views expressed in this document are those of CQSI and CAM. The views expressed herein are subject to change without notice as markets change over time.