3 min read.Updated: 13 Jun 2022, 10:06 PM ISTJoydeep Sen
Stick to your original asset allocation till there’s some clarity on geo-politics
There is a war going on between Russia and Ukraine. There is another war going on, which is geo-political, and for the control of natural resources. Items like oil, gas, fertilizers, wheat, etc., of which Russia and Ukraine are significant exporters, have been impacted. The US and the Euro nations have imposed sanctions on Russia. While imposition of sanctions gives them high moral ground, what gets overlooked is the boomerang effect on the country imposing it. Economies depend on each other for items of natural scarcity like crude oil/gas or for items of production efficiency. As a result, inflation is hurtling upwards all over the globe: It is 9% in the UK, 8.1% in the Euro Zone and 8.6% in the US. To combat raging inflation, central banks all over the world are hiking interest rates, except China. There is the risk of higher interest rates impacting growth next year, in countries used to low interest rates and flood of money being pumped in.