Mid-March Update


Vladimir Lenin famously stated, “There are decades where nothing happens; and there are weeks where decades happen”. This is one of those weeks.

Instead of writing to you, our clients, about the ongoing debate around the improving economy and markets in the context of inflation and rates; we wanted to share an update on an issue top of mind for you and most others worldwide.

With less than a few weeks removed since Russian troops officially invaded sovereign Ukraine territory, we have witnessed many storylines unfold. The unparalleled (and inspiring) bravery of Ukrainian civilians battling against unimaginable odds. The rise of a 44-year-old former comedian turned president captivating the world as a heroic and revered leader. Uncharacteristically “SWIFT” and cohesive action from western governments and corporations in response to the atrocities inflicted on the people of Ukraine. We have also been reminded of the staggering human toll that war can inflict on all those involved – only this time via first-person, raw, and sometimes real-time footage made possible by modern-day digital media.

So where are we today? What are we watching and how are these events impacting our approach? This situation is both incredibly complex and dynamic which makes forecasting possible outcomes all the more difficult. That said, both sides appear to be digging in for a fight, making a near term de-escalation seem less likely. Should this turn out to be true, then what issues are we focused on to best mitigate risk across your portfolios? We are focused on how Russia will act in Ukraine, Europe and the global marketplace to counter western pressures. We are looking at key players across the global energy and commodity spectrum to better understand how they will respond to rising prices and falling Russian supplies. We are carefully monitoring how Central Banks might alter their rate-hiking plans given a commodity shock and its impact on growth. In that same light, we are actively monitoring the fragility of global consumers in the face of rising prices and increasing geopolitical uncertainty. And finally, we continue to monitor the evolution of global sentiment in the face of increasing Russian aggression to understand the long-term consequences of sanctions on corporate earnings growth.

Against such a rapidly changing backdrop and a myriad of unknown factors, global market volatility has once again risen to extreme levels. With a growing likelihood of a prolonged conflict, how are we adjusting our approach? In keeping with our long-term focus, we believe most of our portfolio companies are highly resilient and should emerge from the current storm with their long term prospects intact. However, we have begun to trim exposure to holdings in unfavourable geographical areas while re-evaluating some of our equity positions that will face headwinds going forward, in favour of more defensive/tactical positioning.

With the events in Ukraine continuing to unfold, we remain vigilant in monitoring the impact on capital markets and evaluating how they could affect your investments with us. While it may seem far from reach at the moment, we like many others, remain hopeful that a negotiated resolution can be found in the near-term.

“In the short-run it’s difficult to see an easy way out of the current geopolitical nightmare. In the long-run it’s always a bad idea to bet against the power of the human spirit.” – Ben Carlson


Further Reading: Fiona Hill on Putin and his Ambitions

If you're interested in learning more about current geopolitical events in the Ukraine, we suggest a recent article published by Politico (linked below). The interview with Russian expert Fiona Hill provides important contextual information regarding the current Russian invasion of Ukraine and the motives of the man behind it. Fiona Hill is a senior fellow with the Center on the United States and Europe at the Brookings Institution. She served as deputy assistant to the president and senior director for European and Russian affairs on National Security Council from 2017 to 2019.

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