Marketing Communication 
This is a marketing communication relating to a strategy implemented through funds. When these funds are registered in your jurisdiction, please refer to the fund's prospectus and KIID before making any final investment decision.


Beyond the crisis in Ukraine, a durable risk regime change
in the markets

Published on March, 9th 2022Market and research
Winter in... Coming?
Emmanuel Bourdeix

Emmanuel Bourdeix

Chief Executive Officer

Article written on March 7th, 2022 

Key takeaways:

  • Risk regime in the markets changed late November, well before Russia’s invasion of Ukraine. This increase in risk was triggered by a change in monetary policy initiated by the FED to control inflationary pressures.
  • The war in Ukraine raised the risk level yet another notch and amplifies inflation through the rise in commodity prices and the risks it poses to growth. Even if the conflict in Ukraine is resolved satisfactorily, everything will remain to be done for Central Banks.
  • Risk is likely to remain high for longer than expected on both bond and equity markets. For investors, it is time to acknowledge this and strategically put risk back at the heart of portfolio construction.


The invasion of Ukraine by Russia is, of course, a major event for the international community and for the markets: it is the return of war in Europe, with a human toll that is expected to be heavy, particularly for civilians, unprecedented nuclear threats, a surge in commodity prices in an already inflationary context, possibly new disruptions in supply chains, etc.

However, as an investor, it is important to bear in mind that even before the outbreak of the war, the risk regime is the markets had already risen to a new level since late 2021.


► This change in risk regime had already been identified at the end of November by our proprietary risk index, the MTI (Market Tension Indicator) which aggregates different asset classes’ risk to identify risk regimes. This is true for the US, Europe as well as emerging countries.


MTI (Market Tension Indicator),

Source: Bloomberg, Seeyond, as of 07/03/2022. Figures mentioned refer to previous years.
Past performance does not guarantee future results.


► Main explanation: the FED’s balance sheet, which has been the main driver of market growth in recent years, will be reduced. The announcement was officially made by the FED early January and it is a driver of volatility for the markets (as in 2015 and 2018).


Evolution of the S&P 500 index and the FED’s balance sheet
from March 2009 to end-January 2022

Evolution de l’indice S&P 500 et du bilan de la FED  de mars 2009 à fin Janvier 2022

Source: Bloomberg, Seeyond, as of 28/01/2022. Figures mentioned refer to previous years.
Past performance does not guarantee future results.



To date, the war in Ukraine did not eliminate the problem of a generalized rise in prices, but amplified it through a new tension on commodities. Central Banks' rate hikes will have to be well measured and sequenced over time in order not to derail a growth that is waning and that is not helped by the current geopolitical context. The path is narrow and the specter of stagflation hangs over the economies, which is neither good for bonds nor stocks.

Also, even in the favorable case of a quick resolution of the conflict in Ukraine, besides the relief and rebound that would follow, equity markets will still experience a degraded risk environment compared to 2021 and where everything that had worked well might not be as relevant anymore. For example:

  • timing the "risk on/risk off" moments will be more difficult: "buy the dip" strategies will be more random
  • focusing on value/growth/quality diversification will not be enough to significantly mitigate the overall risk increase in the asset class
  • and, in a stagflation scenario that is becoming increasingly likely, holding bonds statically to protect the equity exposure in an allocation will be ineffective

What if, in 2022, we simply took note of the rise in risk beyond the Ukrainian conflict and strategically put risk back at the heart of portfolio construction, by reinforcing solutions that look to minimize equity volatility, overlay protection, or flexible bond/equity allocation? It is never too late to do the right thing.



The strategies mentioned are subject to the following main risks:

Equity volatility minimization: risk of capital loss, equity risk, geographic and portfolio concentration risk

Overlay protection: risk of capital loss, volatility risk, equity market risk, model risk

Flexible allocation: risk of loss of capital, debt risk, interest rate risk, equity risk, leverage risk, currency risk, derivatives risk

This article has been provided for information purposes only to professional clients as defined in the MiFID Directive. It must not be used for retail investors. The provision of this material or reference to specific sectors or markets in his article does not constitute investment advice or a recommendation or an offer to buy or sell any security. Investors should consider the investment objectives, risks, and expenses of any investment carefully before investing. Views expressed in this article as of the date indicated are subject to change and there can be no assurance that developments will transpire as may be forecasted in this article.