A former Goldman Sachs hedge-fund boss sees 3 market scenarios for how Putin's war with Ukraine ends — and shares which way equities could go under each outcome

• The most likely outcome of the ongoing war is that Ukraine won't surrender to Russia, according to Raoul Pal.
• Pal expects stocks to rally once Russia's invasion ends, as that would give markets clarity on the situation.

Raoul Pal believes investors need to figure out how to protect themselves against geopolitical uncertainty, as Russia's war with Ukraine rocks financial markets.

With that in mind, the former Goldman Sachs hedge-fund manager has outlined three possible scenarios for how the conflict could end, and what it means for assets.

"Economic events are much more forecastable," Pal, currently CEO of Real Vision TV, said. "Geopolitical events have many more different nuances."

Pal, who once revealed that 98% of his portfolio is in crypto, shared in a video this week that he's now starting to buy bonds, some gold, and some dollars as the market awaits clarity on the impact of Ukraine's crisis.

Pal laid out 3 possible outcomes to Russia's invasion of Ukraine

1. Best case: Russia and Ukraine reach a ceasefire agreement, and recognize splinter states. (Ends in Western sanctions easing over time, but a food crisis and global recession still happen).
2. Highest probability case: Ukraine doesn't negotiate or surrender, and Russia installs a puppet government. (Western sanctions still hold, and NATO amasses weapons on the borders.)
3. Worst case: Poland enters the conflict, oversupplied with weaponry to support Ukraine. (NATO vs. Russia in an all-out war.)

Within the next two to three weeks, it'll be clear which scenario plays out, Pal said.

He described the first as a "dirty, ugly resolution" that could see stocks rally, because there's a chance the West will undermine its own sanctions on Russian commodities.

"So they'll sanction them on a bunch of stuff. But they'll say through the back door, 'Listen, we need the copper. We need the nickel. We need the oil. We need the gas' — which is a bit of a shitshow. But that's the state of the world," he said.

Under the second, Pal again expects equities to rise. If Russia's assault ends, so does uncertainty for investors.

"Clarity is what markets want," he said.

Investors are already testing the third, trying to assess whether tensions between the West and Russia, as well as China, will lead to World War III. If not, then markets could gain, he believes.

Many on Wall Street are worried about the risk of stagflation — a combination of stagnant economic growth and rampant inflation — as commodity prices soar due to the Russia-Ukraine conflict.

Faced with this risk, the US government and the Federal Reserve could decide to support the economy via stimulus measures — which they did during the pandemic. Tech stocks were boosted by easy money in 2020 and 2021, but dropped after the Fed vowed to reduce its balance sheet.

"I've been waiting to buy tech, and I don't think we can get there until we start to see the monetary spigots opening up again," Pal said.

"I think they will come, and I think they'll come in form of transfer payments," he added, referring to direct handouts of money to individuals.

Pal feels buying commodities at their current elevated levels isn't a good idea. If the Ukraine crisis ends, half of them will fall 50% within minutes, he said.

"The ramification of the high commodities, which is slowing growth, makes bonds a good bet," he said. "The ramifications of the 'weaponizing' of reserves makes gold a good bet."

Pal advised investors to filter out possible propaganda, and to consider the bigger picture.

"It's best not to try and be too clever, too cute, pick the exact scenario. But go at the toppest-level macro to say, 'OK, what are the things here that can help protect me'?"

"And those will be gold, bonds, dollars — and I like crypto, but I would prefer it if we had the central bank printing."

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