UBS economists detail three scenario analyzes for the markets. As the military results and political motives are likely to remain opaque, they believe it is more practical focus attention on the potential impact of war and sanctions on commodity prices, which are visible and have a direct impact on economies around the world.
center stage
“We hope that the sanctions will contribute to the Russia’s phasing out of global supply chains of energy, instead of forcing an immediate cessation of energy flows. Our crude oil forecasts Brent, in this case, are $125/bbl for June, $115/bbl for September and $105/bbl for December“.
“Broadly stable corporate earnings expectations and falling geopolitical risk premiums mean that in this scenario, we would expect markets to move higher by the end of the year. Our S&P 500 target for this scenario is 4,800 by the end of 2022about 10% above current levels.”
downside scenario
“Oil prices could rise above $150/bbl and gas may need to be rationed in Europe“.
“Lower corporate earnings expectations and a still elevated geopolitical risk premium would mean global markets would likely move lower. Our S&P 500 target for this scenario is 3,700about 15% lower than current levels.”
upside scenario
“Given the consumer spending on services still expected to pick up due to lifting of Omicron-related restrictions, global growth should be robust In this stage. As long as inflation also comes down over the course of the year, we believe the S&P 500 could end the year at 5,100 in this upside scenario, about 17% higher than current levels.”
Source: Fx Street
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