Geopolitical tensions between Russia and Ukraine have intensified considerably over the past week. The crisis will probably mark a new security paradigm for Europe and the United States. Even so, Citibank economists they continue to trust the markets.
Future capital gains will depend on the delivery of higher corporate earnings
“We think the Fed is still on track to hike in March despite growing geopolitical concerns. Furthermore, we expect inflation to subside possibly by spring 2022 and the global economic expansion to survive into 2023 and beyond. When a lasting slowdown in inflation becomes apparent, the Fed may not surprise markets with a more aggressive stance.”
“The crisis could accelerate the unstoppable trend of ‘greening the world’, as the EU could focus on developing renewable energy capacity to become more independent from Russia. Additionally, a rise in long-term US interest rates, perhaps coinciding with peak inflation, may create a stronger immediate performance environment for US growth stocks.”
“We believe a future 9% gain in the S&P 500 will be roughly in line with mid- to high-single-digit EPS gains, a pace that requires continued economic expansion.”
“If energy prices don’t collapse as they did at the start of the Fed’s last tightening cycle in 2014, when crude oil fell 66% in two years, we would expect broad emerging equity markets to perform well and offer diversification. to global equity portfolios.”
Source: Fx Street
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