Gasoline

Israel’s attacks on Iran will continue until Iran is forced to strike regional oil supply to get the US to restrain Israel. That may not work. Investors should prepare for a broader economic impact of the conflict. 

Investors should hold gold, build up some cash, tactically overweight US equities relative to global, and prepare for at least minor oil supply shocks – possibly major shocks – as the Israel-Iran war escalates.

Investors have given up on European assets, which now suffer exceptional discounts to US ones. However, tighter US fiscal policy, the end of Europe’s austerity and deleveraging, the LNG Tsunami about to hit European shores, and the global capex fueled by the Impossible Geopolitical Trinity mean that Europe’s time to shine will soon come back.

Investors have given up on European assets, which now suffer exceptional discounts to US ones. However, tighter US fiscal policy, the end of Europe’s austerity and deleveraging, the LNG Tsunami about to hit European shores, and the global capex fueled by the Impossible Geopolitical Trinity mean that Europe’s time to shine will soon come back.

Investors should prepare for economic data to weaken even as policy uncertainty and geopolitical risk skyrocket ahead of the US election.

Our quant models suggest Democrats are still slightly favored for the White House. Our Senate model favors Republican control, though Montana and Ohio are the weak links that could deliver Democrats a de facto Senate majority in the event they keep the White House. But there are still six months before the vote. An oil shock from the Middle East or other negative economic news would force a major change to these models.

We are strategically bullish on the outlook of the energy sector. Domestic and external political constraints asserted themselves, restraining the most negative impulse against this sector by the Biden administration. Go long energy versus cyclicals (ex-tech).