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Amid a range of geopolitical narratives, what matters is that the US strategy of economic engagement with its rivals is failing, giving rise to a new strategy of containment that will reinforce the secular rise in geopolitical risk. Our market-based quantitative indicators of geopolitical risk are set to rise in the coming year.
The Netherlands has a healthier and more stable economy and demography than its European peers. Investors should stay overweight developed European equities, including Dutch equities, relative to emerging European equities.
Results from Tuesday’s elections suggest that the Democrats are doing better than what their 2024 polling are showing. While the results are marginally positive for equities, investors should not overrate this off-year election, especially considering the slowing economy and the many foreign challenges facing the US.
Following the October US jobs data, the ‘Joshi rule’ real-time US recession indicator increased from 0.11 to 0.15, meaning that it is fast approaching its event horizon of 0.20. We go through the investment implications. We also highlight a new long-term recommendation. Plus, the Norwegian krone is close to a potential rebound.
Investors should reduce risk, increase allocation to safe havens, and brace for oil price volatility and supply disruptions stemming from the Middle East over the next zero-to-12 months.
The fundamental component of long-term inflation expectations has climbed to its highest level since 2008 in both the US and the euro area. This means that both the Fed and the ECB will need to engineer inflation to undershoot 2 percent for an extended period if they are to maintain their 2 percent inflation targets. We explain what this means for investment strategy over the coming 6-12 months. Plus, we pinpoint what to focus on in this Friday’s US jobs report. And we identify food and beverages (PBJ) and the Indonesian rupiah (IDR/USD) as excellent rebound candidates.
Stronger US growth elicits a response from the House Republicans. But a government shutdown is not devastating to the economy. What is more devastating would be a crisis in the Middle East, Europe, and Asia. Stay long US defense, energy, and large caps stocks.
More equity volatility is coming in the short run. Trump’s nomination looks to be smooth, which marginally reduces the incumbent party advantage and increases policy uncertainty.
Investors underestimate the likelihood of the war in Israel spilling outside of Gaza, and engulfing wider swaths of the Middle East, endangering energy supplies. Stay overweight Energy and Aerospace & Defense.
The Israeli-Arab crisis is more likely to expand and cause oil disruptions than market consensus holds. Close long dollar trades and go long energy and defense stocks relative to cyclicals.