Venezuela
Go long LATAM ex. Brazil banks / short global bank stocks. Brazilian bank equities will underperform due to poor and worsening macro fundamentals.
There will be little market and macro implications from the US intervention in Venezuela. Fade away any near-term moves in global oil markets. However, Colombian and Peruvian assets will benefit from lower political risk premiums. We are upgrading Colombian equities and fixed income to overweight versus EM.
The US removal of Venezuela's Maduro does not presage an invasion of Greenland. But it does justify a lingering risk of conflict with Iran.
US intervention will likely force out Maduro from Venezuela and reopen the economy. This could increase Venezuelan crude production in the long run, a modestly bearish outcome for oil markets over cyclical and structural horizons.
Oil markets will not be impacted by Venezuela in the near term, but by shocks from the Middle East. Maduro’s ability to stay in power in the short-term removes an avenue of oil supply relief. The same avenue is cut off if Trump is reelected. Geopolitical shocks in Venezuela could present tactical buying opportunities for Chile, Peru, and Colombia.
