So what should we make of the past few days, headlines from the war in Ukraine? There's been a lot of developments around the war and Ukraine, and a lot of news. We continued to be worried about a potential stagflationary impulse to the world. What do we mean by that? Well, first energy prices are high and the war still has the potential to send them higher yet. And secondly, it's not only about energy. It's also about food, Russia and Ukraine generate about 30% of the world's wheat production in our key producers of other agricultural staples and fertilizers. And thirdly, it's not only about food and energy. It's also about the broader supply chain. We know how stretched that is coming out of COVID. And now we have a situation where large airspaces are closed off, major producers of cargo equipment are shut down, and a series of tit for tat and cyber-attacks is disrupting a variety of other supply chain issues. So all in all that has the potential to send prices higher and lower growth in certain regions. And we don't think it's a global phenomenon, but Europe and some parts of the world, particularly heavy energy importers are exposed. So will some of these themes be with us longer, even when the acute phase of the conflict is over? Well, possibly. We'll probably get de-carbonization on steroids as Europe tries to diversify away from Russian gas and clout, even more resources into alternatives and renewables. That is a little bit inflationary. We have the world fragmenting further into global blocks, quasi stealth, the globalization, that two raises transaction costs. And finally, the focus on national security means that more resources are deployed into the defense industry. And some of that can also be inflationary on the margins.

War is not only about what happens on the battlefield. For investors, sanctions and counter sanctions also matter. We have seen a remarkable degree of Western financial sanctions imposed on Russia and markets have not fully digested all of the effects. There'll be some disruptions, there'll be missed coupon payments. There'll be defaults on bonds. There'll be liquidity squeezes. All this will require selective intervention. It's not systemic. It's not 2008 or even March, 2020, but there's still some bumps in the road that need to be smoothed out. Well, I'll make three key points here. The first is there is no scenario where Russia on the west find a more stable equilibrium than they had before the war. That means the global order is, will be less stable and high food and energy prices may actually trigger a variety of instability in other countries across the globe. Secondly, this conflict accelerates the trends we saw with the U S China trade war with the pandemic, which is it fragments the world further into economic blocks that raises transaction costs and has other side effects. And finally it invites the state even more to become an economic actor, to decide when to build up the defense industry at home for national security, how to diversify energy so that you don't buy Russian gas and how to screen out the right foreign buyers of your own companies or to limit your own buyers of foreign companies. Either way it is protectionism and the states as an inefficient economic actor coming back.

We're continuing to follow the news and digest the consequences for financial markets and investors. So please do check back with us.