“They’re funny things, Accidents. You never have them till you’re having them.” - Eeyore
JPMorgan Chase CEO Jamie Dimon seemed to catch the financial market’s attention a few weeks ago when he warned in the company’s third quarter report that, in conjunction with tight labor markets and persistently high inflation, “the war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships. This may be the most dangerous time the world has seen in decades.”
Indeed, it might be. Or maybe not. We will only know with certainty ex post. But Dimon’s warning is valuable. First, it highlights how interconnected and self-reinforcing many systems are – determining cause and effect between geopolitics, global trade, and commodity markets is rarely straight forward. Second, it raises awareness of a possible (and we would argue probable) shift in risk fundamentals that has occurred over the past few years.