While the world is watching the U.S.-Ukraine conversation descending into a comedy show, it is time to anticipate higher inflation and reduce U.S. equity positions.
It is clear that the top agenda of U.S. government is to contain China at all costs, even at the sacrifice of Ukraine and Europe. Winning support from Russia to contain China has a higher priority now. It seems the situation is different from 1939: Russia suffered heavy loss in Ukraine, so it is unlikely to try Poland, different from Germany that suffered no loss.
The next steps are pretty clear: US will continue increasing China tariff and implement export controls to China, and force the entire world to follow. As a result, US inflation will surely go up, which is a necessary price to pay to contain China. Stock price will decline as the Fed may actually need to increase rate to combat inflation. US equity valuation is already so high, seems not worthwhile to chase the last dollar.
I don’t want to take sides, but I feel sorry for Ukraine. However, that is the result of abandoning nuclear weapon in 1994 and trusting others to protect. In the meantime, General Kim is happily living in his palace, enjoying protection from all asides.
I think I need to buy more firearms.