Russia

Rising Russia-NATO risks, tactical oil/gold trades, tougher sanctions on Russia (maybe China), China stimulus with ~5% growth target, and US checks on Trump’s ambitions will define Q4. 

Russia’s recalcitrance will probably trigger a near-term global stock market correction by prompting larger sanctions and derailing US-China talks. But Israel’s actions do not raise our odds of a major oil shock. 

Trump, the Fed, the Russo-China bloc, Venezuela, and France are all seeing developments that imply some contrarian tactical views: Long USD, overweight US versus Europe, overweight Europe versus China, and short oil. 

The media is missing the big picture: the war is already contained. The falling oil price confirms that. We fully expect cold feet and volatility incidents in the very near term but there is only a 5% chance of Russia triggering a larger war with NATO – and that is what really matters. 

Investors should stick to a defensive stance in the very near term as the Russia-Ukraine conflict and persistent trade tensions cause market volatility.

Russia poses an immediate risk to global financial markets, and then perhaps a buying opportunity. Trump is pivoting to ceasefires and trade deals, but Russia could trigger a new tariff shock first.

Acute geopolitical risks, like a massive oil shock, may be abating. But structural geopolitical risk remains high and could upset a blithe market. Cyclical economic risks are underrated as the US slows down and China continues to stumble. Investors should book some profits in anticipation of tariff implementation and a downturn in hard economic data.

Russia has strong incentives to sign a ceasefire with Ukraine – namely its weak economy as the oil price falls. European assets will continue to benefit.