GeoMacro | Cyclical Trends
Medium-term analysis of geopolitical dynamics and their impact on asset returns. Typically published twice a month.
Beyond the imminent SCOTUS ruling, we revisit our bullish Europe thesis – with the Chart of the Month suggesting that Germany is so back – as well as our bearish USD view. Also, a few charts on oil and geopolitics.
Ignore Japan's constitutional debate. Rearmament will accelerate anyway. Tech, defense stocks, and industrials will benefit. The threat to JGBs is real but will probably be contained.
Sell America? No. The GeoMacro trade is Buy RoW! Left-tail risks are easing because the US isn’t collapsing. That argues for less enthusiasm for safe havens, not selling US assets. The S&P 500 can perform while remaining underweight the US – it happened in 2025 and will happen again.
The US is likely to take significant military action in Iran, justifying our 40% risk of a major oil shock. Tactically go long Brent crude.
Our top five "Black Swan" risks this year are familiar but all too realistic in the current climate. Investors should stay overweight US equities and EM-ex-China until some hurdles are cleared.
Japan's new government will continue, but politics and foreign policy have become more competitive.
The year 2026 has started off well, with not even the threat to central bank independence denting the market's enthusiasm. Perhaps our tactical caution is misplaced.
