William Davies, Global Chief Investment Officer and Joshua Kutin Head of Asset Allocation, North America at Columbia Threadneedle Investments recently discussed in CTI's global outlook webinar the four possible scenarios for the way forward in the Russia/Ukraine crisis and their implications for markets. Today, according to Joshua, there is a 60% chance that the armed conflict in Ukraine will continue. In addition to the human tragedy, the continuation of the conflict would have a negative impact on global economic growth and high inflation fuelled by high energy prices. "Nevertheless, in this scenario, we could see marginally positive equity returns in 2023," Joshua Kutin said.

Joshua believes that there is low risk of a possible escalation of the conflict to other countries or an increase on sanctions. However, if this scenario materialises, recession in Europe would be inevitable. We could face global recession if the conflict reaches China, whether through Western sanctions against China or aggression from China: "Russia has a small weight in the stock indices, while China has a much greater importance for the world economy. Stock prices could then collapse by another 20% in the United States, 27% in Europe and a third in the Asia-Pacific region,” explains Joshua Kutin.

William Davies also discussed his belief that we should see inflation ease somewhat towards the end of the year. However, according to William, it is very likely that Europe will enter a mild economic recession: “The degree of recession would depend on the Russian oil and gas supply situation. In the meantime, volatility remains high, and companies will adjust their earnings forecasts as demand evolves.” William said.