CIO Perspective – One month into the conflict

One month into the conflict, one word stands out: de-escalation. Markets have moved through weeks of escalation, ceasefires, blockades and reversals, yet risk assets remain close to their highs for the year: Equity markets have stayed firm; credit spreads remain tight. At first glance, markets appear to be looking through the geopolitical shock.

That resilience should not be mistaken for comfort everywhere. Long-dated bond yields remain high, and inflation expectations have moved up. This creates a striking contrast: risky assets are holding up well, while rates continue to reflect a more difficult inflation backdrop. That matters because higher inflation makes life more complicated for central banks and governments alike. Monetary policy becomes harder to steer. Budgetary policy becomes more constrained.