It comes as markets try to overcome a series of simultaneous economic hurdles, including Russia’s invasion of Ukraine, rapid inflation, rising interest rates and supply disruptions as China tries to contain the Covid-19 outbreak. . Speaking to CNBC’s “Squawk Box Europe” on Friday, Roche, chairman of the Independent Strategy, suggested that evidence of atrocities committed against civilians in Ukraine by Russian forces would prevent any possibility of a speedy peace deal with Russian President Vladimir Putin. Therefore, the West’s only option is to seek regime change in Russia, he said, given that Putin can not be considered internally to leave Ukraine without a “victory”. “He is not going to trade the withdrawal for any reduction in sanctions, so sanctions remain in place and I think the consequences for Europe are that you will see a recession, because sanctions will actually increase and lead to a complete energy embargo.” said Roche. EU countries agreed last week on a series of new sanctions on Russia in light of reported cases of sexual violence and torture and executions of civilians, including a full embargo on Russian coal imports. Europe is also considering additional measures, including a full embargo on imports of oil, coal, nuclear fuel and gas. A rocket attack on a crowded train station in the eastern Ukrainian city of Kramatorsk on Friday killed more than 30 people and injured more than 100. of Kiev. Ukrainian officials have warned that further atrocities could be uncovered in cities recaptured by retreating Russian troops, and Roche has argued that investors will no longer be able to separate politics from markets. “This is a huge supply-side shock that will continue in food, energy, metals and I can go on. This will continue while at the same time, we are facing global inflation, we are facing rising interest rates – I think 30 years [Treasury yield] “It will be at least 3.5% a year – and we are, of course, looking at supply disruptions in China because of what is happening in Covid, which people are not talking about, but it is obviously another side of the supply system in the world.” .
“War concession”
Roche suggested that this would be too much for the stock markets to overcome in order to keep them moving higher, and argued that historically high inflation would not subside as economic growth slowed, as would normally happen in a normal recession. “In a normal recession, production and demand go down, inflation goes down. In this kind of recession, a ‘war divestiture’, you actually have production going down at the same time as costs go up and inflation goes up,” he explained. “You see that in the labor market mismatch, you see that in the price of goods, and I think that this will continue to accelerate, so you are faced with a very strange situation where central banks have to choose between the inflation target and the development “. Investors are watching central banks’ comments to assess the possible pace of monetary tightening as policymakers try to contain inflation, but Roche suggested that any discussion of policy rates “over the turn” in the coming years. it is “premature”. “When the pain is extreme in terms of production and performance, in the growth of the economy, of course they will subside, but I think it will take much longer for that to happen than the stock market assumes,” he said.
