Geopolitics
US assets and the US dollar should remain resilient relative to global peers over the next 12 months as policy uncertainty, election risk, and geopolitical risk reach a climax. After that, investors should reassess their regional allocation.
European assets are selling off as investors panic about the upcoming French election. Is this panic justified, and if so, for how long?
The new national unity government in South Africa creates a geopolitical opportunity that investors should not bet against in the short term. A broad-based rally is likely to unfold relative to other emerging markets. However, structural problems and distrust within the new coalition hold out significant risks over the long run.
Europe did not witness a major policy reversal. Inflationary pressures are coming down, enabling the ECB to cut rates and European states to maintain soft budgets. Geopolitical challenges ensure that European parties continue to cooperate on national defense, economic security, and energy security.
