Morning Notes — Outlook

The sanctions enacted against Russia have already taken a massive toll on the country.  Russian companies are unable to access capital, financial markets have been closed and the ruble has lost ~40% of its purchasing power.  The voluntary actions from global businesses are equally damaging.  Turkey has indicated it will enact the Montreux Convention by not allowing Russian military ships to pass through the Dardanelles and Bosphorus Strait and Russian vessels are not being allowed to unload their cargo at Black Sea ports and elsewhere.  China has also begun to break ties with Russia.  Today, Russia’s Foreign Minister said Moscow is ready to discuss Ukraine’s desire for security guarantees.  A deal of some sort seems likely as Russia’s position is militarily and economically untenable, but the sanctions will likely stay in place for a long time, creating a headwind for global growth. Markets have repriced tightening expectations as a result, with just 120bps now expected this year vs. 150bps just two weeks ago.   Russia is a major producer of many commodities, so the same sanctions should be considered an inflation tailwind.