GeoMacro | Cyclical Trends
Medium-term analysis of geopolitical dynamics and their impact on asset returns. Typically published twice a month.
Regional geopolitical risk is rising for Europe, EM Asia, and South Asia. We adjust our regional risk matrix accordingly.
China's slowdown coincides with at least a minor global oil shock – a combination we have long feared.
In this monthly iteration of our chartpack, we focus exclusively on just two questions. First, we present four scenarios for how the situation in the Middle East develops. Second, what happens if the pernicious scenarios come to dominate, how investors should play a global recession, were it to occur.
Close oil trades tactically, but beware lingering economic costs of the Iran war this year.
An energy price spike caused by a Middle Eastern war almost guarantees that Republicans will lose control of the House, and the chance of a Democratic Senate victory increases from 35% to 40%.
In the short term, there is plenty to be worried about in macro beyond the Middle East. The market was on thin ice before the Iran conflict. In the long term, the base case scenario remains bullish, but the war in the Middle East needs to be brief.
It is too soon to sell the rip in oil or buy the dip in stocks. Stick with risk-off trades for now.
The president did not announce significant new tax cuts or economic stimulus.
Trump is saving face with new tariffs but will avoid any major new tariff shock until 2027. For now, Iran risk will overshadow tariff volatility.
President Donald Trump’s political capital is moderate, as he frontloaded his most disruptive policies within the first year.