CIO Marketupdate Ukraine: Composed reaction

Both the US and the EU had warned such a step. Both are likely to react immediately with sanctions. The US has already banned imports, exports and financial transactions with the two regions. This approach is the same as in 2014, when Russia annexed Crimea. It is currently unclear which sanctions will follow. Tougher sanctions could also be imposed without further action by Russia.

The financial markets are reacting negatively to the news. Stock indices around the world have declined, yields on US bonds have fallen and the price of crude oil and gold have risen. As typical as this reaction is, there has been little sign of panic or outright shock so far. This indicates that the financial markets are not assuming an escalation spiral despite the latest developments.

Against this background, we confirm our portfolio allocation. With our slight overweight in equities, we are exposed should the conflict escalate further. Conversely, we would benefit from a recovery. We also rely on diversifying elements such as minimum variance in equities or gold and insurance-linked securities in alternative investments. We continue to monitor the situation closely in order to react quickly if necessary.

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