Trade
The market’s pricing of a soft landing means that geopolitical risks are becoming more, not less, relevant in 2024. US domestic divisions will invite challenges as foreign powers rightly fear that US policy will turn more hawkish after the election.
The attacks on Red Sea commercial tankers by Iran’s Yemeni proxies, the Houthi movement, are an inflation risk inasmuch as they lengthen voyage times for any shipping forced to avoid the Bab el-Mandeb Strait. The risk of an expansion of these attacks is, in our view, limited, given Iran’s inability to project naval power in the region.
Democrats are favored to win the election until recession materializes. But recession risks are high. Investors should adopt a defensive and conservative strategy in 2024 amid extreme US policy uncertainty.
Global instability will continue in 2024 – whatever happens afterward. Slowing economies will exacerbate already high geopolitical risk and policy uncertainty stemming from the US election and foreign challenges to US leadership. Overweight government bonds, defensive sectors, the Americas versus other regions, aerospace/defense stocks, and cyber-security stocks.
This report looks at the prospects for the Swedish krona, following the pause by the Riksbank.
President Biden is facing foreign challenges on three fronts and these challenges are coalescing around the critical states of the Midwest. Take risks off the table and stay defensive in 2024.
Investors should not get their hopes up about the Biden-Xi summit. Wait to see if a new ruling party is elected in Taiwan before downgrading geopolitical risk in the Taiwan Strait. US-China strategic détente is possible but neither the geopolitics nor the macro backdrop warrant a risk-on position next 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.
US fiscal, monetary, and foreign policies are unlikely to deliver any dovish surprises for investors in Q4, due to the impending government shutdown, persistent inflation, and instability among OPEC+ and China.