TV pictures from Ukraine are getting worse by the hour, with politicians predicting things won’t improve anytime soon. No wonder therefore that the #FTSE has fallen hard again today on the drumbeat of war.

So what’s the chance of a quick solution? Unfortunately slim. On Friday, I thought there might be an agreed ceasefire based on President Zelensky accepting never to join NATO, in return for retaining sovereignty.

Alas this was a ‘pipedream’, since Putin’s ultimate goal now appears to be to rule the county from Moscow. Meaning there could be unrest in Ukraine for years, alongside punitive sanctions. Unless of course, Putin is somehow removed quickly by the Russians , which must be short odds.

Ok apart from the dreadful humanitarian costs, what other shock-waves might there be?

Well back in Apr’20, the pandemic's impacts were inherently deflationary, with central bankers / governments being forced to throw vast monetary/fiscal stimulus at the problem.

In contrast this time, oil/gas, wheat & other commodity prices are soaring. At a time when CPI is already dangerously high & set to climb further. In turn, probably choking off similar ‘emergency’ measures, to prevent inflation spiralling out of control.

So is the market correct in forecasting significant demand destruction due to stagflation? As evidenced by a flattening yield curve, widening credit spreads, a flight to safety, distressed selling & declining multiples?

To me at the index level, the answer is probably yes. With the S&P500 & FTSE100 trading on PEs/div yields of c. 19x/1.4% & 14x/4% respectively. Broadly in line with historical norms.

Yet, eventually high prices are a potent cure for high prices. Encouraging firms & households to use substitutes &/or cheaper products. Alongside accelerating the adoption of efficiency/productivity improvements, AI/automation & cleaner energy.

Nonetheless, there’ll also be a lots of dispersion across regions, sectors, asset classes & companies. As investors frantically hunt for 'better clothes to wear during this 2nd deadly storm’.

Leaving us with the final $64m question of where to invest?

Here despite their ‘safe haven' status, I’d still steer clear of sovereign bonds, given ‘real yields’ are set to drop even deeper into negative territory.

In contrast, I remain positive on healthcare, renewables & tech/software stocks, which offer secular growth & robust pricing power. Especially FTSE heavyweights like Sage & AstraZeneca, alongside smallcaps Equals Money, FD Technologies & Northbridge Industrial.

Plus, if there's ever a major ‘capitulation’, then it could provide another great opportunity to move up the quality & size curve.

Albeit in the meantime, I'm planning to 'don' the hard-hat & hunker down again.