GeoMacro
A blend of geopolitics and macro, synthesizing the new and old macro to generate alpha and identify the beta through probability-weighted market views.
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.
Our clients know that we have been very generous when it comes to analyzing President Trump’s policy choices and negotiating style. In our view, ascribing preferences to the man is a poor analytical framework. President Trump goes into every situation trying to maximize his gains, only adjusting his expectations and preferences as constraints become clear. As such, focus on constraints, not stated preferences. Where does Greenland fit in this paradigm?
Europe is in a geopolitical sweet spot. Exaggerated fears of Russian military aggression and abandonment by the United States, as well as increased competition from China, create a geopolitical imperative to stimulate, reflate, and reform. Taken together with fading cyclical headwinds, it suggests that European risk assets can continue to outperform US ones on a cyclical investment time horizon. Remain long European stocks, in particular industrials, and EUR/USD.
Investors should bet against the US seizing Greenland by force and collapsing NATO. But stay tactically defensive anyway.
On Monday – January 19 – BCA Research will hold its View Meeting (open to all clients to view online or as a recording!). This is the gathering of all Chief Strategists to talk about the economy, views, and markets. A veritable Macro Entmoot! Every weekend before a View Meeting, I try to step back and think big picture. In particular, I like to think what will be the defining geomacro issue of the year. And how will it impact the markets.