The Ukraine as a geopolitical flash point increased significantly over the week-end. The result has been a large equity sell-off today but a corresponding increase in commodity prices. This difference in performance is the value of holding a diversified set of asset classes. The demand for commodities has increased as a precautionary move in a crisis while the expected discounted cash flows from equities has declined as a pullback in revenues is likely. Oil is up over 2 percent, wheat is up 5%, gold has increased by 2%. The Eurostoxx index has fallen 3 percent.
There is a strong negative correlation between financial and real assets in a crisis.
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