Geopolitics

Investors should bet against the global rally in risk assets and maintain a defensive positioning until recession risks verifiably abate.

Our recommendations for podcasts (on macro and markets, as well as non-work-related topics) to try over the holidays.

Prefer government bonds over stocks, defensive sectors over cyclicals, and large caps over small caps. Favor North America over other markets. Favor emerging markets like Southeast Asia and Latin America over Greater China, Turkey, and emerging Europe. Stick with aerospace/defense stocks.

Prefer government bonds over stocks, defensive sectors over cyclicals, and large caps over small caps. Favor North America over other markets. Favor emerging markets like Southeast Asia and Latin America over Greater China, Turkey, and emerging Europe. Stick with aerospace/defense stocks.

In this report, we argue that the dollar will enter a volatile trading range, before a bear market begins in earnest. That said, fundamental forces are aligning for US dollar downside.

Investors should maintain a conservative and defensive strategy until recession risks are clearly reduced.

Our best calls of the year were long defensives over cyclicals, short Russia and emerging Europe, long aerospace/defense, short Greater China, and long Latin America. Our worst call of the year was long cyber security stocks.

The S&P 500 is down by 17% year to date, while our portfolio is up 15%. US political analysis is essential for investors but it is best done by geopolitical method rather than Washington punditry.

The Chinese government will repress social unrest, then relax Covid-19 social restrictions to try to stabilize the economy. Russia will be aggressive in the short term but will pursue a ceasefire before March 2024. European and Italian risk will stay high on energy constraints.