Although many hoped for calmer times in 2022, the year has so far continued to keep investors on their toes. Entering the year, the impact of the pandemic was quickly fading in most parts of the world, and many were looking forward to resuming some level of normalcy. Higher than expected inflation and monetary policy normalization were risks but supply chains had shown some signs of stabilization and global central banks were gearing up to raise policy rates and reduce balance sheets. The state of the world changed suddenly in late February when Russia’s invasion of Ukraine triggered the breakout of the most significant military conflict in Europe since World War II. First, it is important to acknowledge the atrocities occurring in the region and the unnecessary loss of human life. The conflict also introduced significant instability into the world, but the greatest immediate impact was the shock to energy and commodity prices. Although Russia and Ukraine account for a relatively small portion of global GDP, they represent a disproportionate amount of the energy and grain exports thus threatening the energy and food supply for much of Europe, and to a lesser extent, the world. This pushed prices in the impacted areas substantially higher and could contribute to shortages.

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