Food Prices Soar as Russia Drops Bombshell on Ukraine and Grain Deal

1. Digital Asset Market: National Australia Bank (NAB) has announced the implementation of payment restrictions for “high-risk” crypto exchanges in order to protect customers from increasing scams. NAB has stated that almost 50% of scams over a thirty-day period were linked to cryptocurrency and had resulted in losses of $221 million. The restrictions will be similar to those already implemented by Commonwealth Bank and Westpac. Despite this, NAB has recently launched its own stablecoin, AUDN, for intra-bank cross-border payments. This stablecoin is not currently available to retail investors.

2. Macro Economics: Goldman Sachs has revised its estimate for the likelihood of a US economy entering a recession in the next 12 months to 20%, significantly lower than the consensus estimates from the Wall Street Journal of 54%. The recent economic data have underpinned the firm's confidence that inflation levels can be regulated without triggering a recession. Positive signs of financial stability, consumer sentiment and employment have all played a part in encouraging "Goldilocks" conditions of economic stability, full employment and sustainable

3. Equities: The market capitalization of the Russell 3000 has surpassed US Gross Domestic Product, showing investors' belief that Corporate America is worth 1.77 times the total output of the US. This high valuation could cause returns to be lower in the long term as it will take years for it to be realized by the markets. Technology valuations are even more inflated and could even be described as 'manic', leading to a negative equity risk premium. Ultimately, it may be difficult to predict when this high valuation will end, but it is likely to end abruptly and not favorably.

4. Geopolitical: Russia carried out airstrikes on the southern Ukrainian cities of Odesa and Mykolaiv shortly after withdrawing from the Black Sea grain deal, causing the price of wheat, corn, and other food commodities to spike. In response, the cargo insurance policy for Ukraine grain shipments was suspended, and Moscow has partially reopened the Kerch Bridge after blaming Ukraine for an explosion that damaged it.

View from our desk

The digital asset market has been a rollercoaster of activity recently, with Bitcoin and XRP taking center stage. Bitcoin has dipped twice below the $30,000 mark in the past two days, now oscillating around this level. This minor pullback was anticipated following the full absorption of the news about BlackRock's ETF. However, the real winner last week was XRP, which is up +50% due to a favorable ruling that Ripple sales of XRP on public exchanges were not a securities violation. This legal victory has injected a new sense of optimism into the XRP market. Looking ahead, we don't foresee any significant downside risk for either Bitcoin or XRP in the coming months, maintaining a cautiously optimistic outlook for their performance.

Turning our attention to the broader economic landscape, the prospect of a recession, which was once a looming concern, now seems less likely. Our team has consistently held the belief that a recession could be avoided, a sentiment that is now echoed by a majority of economists. The equities market has demonstrated remarkable resilience, maintaining its strength despite growing sentiment that it may be overvalued. This resilience is expected to hold, providing a stable backdrop for the financial market.

However, it's crucial to keep a close eye on global geopolitical developments, particularly the escalating situation in Ukraine. The potential for disastrous consequences cannot be understated, making this the single most important risk to monitor closely. The impact of geopolitical tensions on financial markets is often unpredictable and swift, underscoring the need for vigilance and proactive risk management.

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The 1Konto Team

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