GeoMacro

US financial instability reinforces our bearish investment outlook by weighing on economic growth and corporate earnings while also increasing US policy uncertainty and geopolitical risk.

Informe especial

The Russia-Ukraine war has prompted Europe to ramp up its defense spending. This will greatly benefit its defense industry, especially if defense coordination across the EU increases.

Informe especial

Generative AI is a major technological breakthrough that holds tremendous economic and investment promise and will have sweeping effects on wide swaths of the economy. We are bullish on generative AI as a long-term investment theme. However, at the moment we observe hallmarks of an investment frenzy. We believe that there will be a more attractive entry point for patient investors.

Investors in Europe and the American West are already starting to think about the implications of the 2024 election, given that sticky inflation and tighter monetary policy keep the risk of recession elevated.

Informe especial

The first legislative meeting of Xi Jinping’s third term suggests that Chinese policy is continuous and consistent with the previous ten years, which is negative for long-term productivity.

US domestic politics, hypo-globalization, and Great Power Competition favor a revival of US manufacturing capacity. The industrial sector will benefit from the attempt to rebuild US manufacturing. Go long physical infrastructure and defense stocks. Find opportunities to take a long position on the universe versus the metaverse.

Informe especial

Investors should avoid / stay underweight Turkish stocks and local currency bonds versus their respective EM benchmarks. Stay underweight Turkish sovereign credit.

Great Power Rivalry is taking another leg up as Russia and China further align their geopolitical interests. Investors should stay long USD-CNY, favor defensives over cyclicals, and markets like North America and DM Europe that have less exposure to geopolitical risk.

Informe especial

High realized inventories are weighing on global oil prices. We expect oil market deficits will draw on accumulated inventories over the forecast period. Petro-state instability – arising mainly from Russia and the Middle East – is a key geopolitical trend in 2023 and will likely lead to oil supply shocks. We are revising our Brent price forecasts to $97/bbl this year and $111/bbl in 2024. Investors should brace for upward price pressure – as long as recession risks remain contained – and persistent high volatility.

Two developments this week reinforce our key views for 2023. First, Russia’s threat to reduce oil production by 500,000 barrels per day, while escalating the war in Ukraine, confirms that geopolitical risk will rebound and new oil supply shocks are likely. Second, China’s credit numbers for January confirm that the country is trying to stabilize the economy but also that stabilization will not come quickly. Moreover, stimulus does not resolve structural problems over the long run. We remain defensively positioned overall and underweight Chinese assets.