Commentary
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Volatility in Risk Assets
Tensions between the US and China remain elevated and are likely to continue as we move into the election season.
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Oil Prices Surge Amid Rising Tensions
Tensions continue to escalate in the Middle East as Israel prosecutes its counteroffensive against Hamas/Iran in the Gaza and Russia intensifies its attacks on the Ukraine. Most recently, and in reaction to Israel’s attack on its embassy in Damascus that targeted high ranking military commanders, Iran launched a major drone and missile strike at its neighbor.
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AI Enthusiasm
Earlier this year, the World Economic Forum (WEF) published the 19th edition of its Global Risk Reports. The report “highlights the findings from the WEF’s annual Global Risks Perception Survey, which brings together the collective intelligence of nearly 1,500 global leaders across academia, business, government, the international community, and civil society.
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Domestic Equity Advance
Earlier this year, the World Economic Forum (WEF) published the 19th edition of its Global Risk Reports. The report “highlights the findings from the WEF’s annual Global Risks Perception Survey, which brings together the collective intelligence of nearly 1,500 global leaders across academia, business, government, the international community, and civil society. It also leverages insights from over 200 thematic experts”.
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2023 In Review
2023 proved to be a tumultuous year with two ongoing hot wars (one effectively a proxy war between Russia and the West), a contentious and increasingly protectionist relationship between the U.S. and China, and turmoil in the Middle East that threaten critical global shipping lanes, all of which pose challenges to financial markets.
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Rallying Through Uncertainty
To the surprise of many, the geopolitical ramifications from the conflagration in Gaza (and, by extension, the Ukraine) have not extended to the energy complex, in fact quite the opposite. Oil and natural gas prices peaked in late October, which closely preceded the Hamas attack on Israel.
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A Shift in Market Leadership
With ongoing wars in both the Middle East and Ukraine, the long-term risk to markets lies in the potential expansion of these military engagements and the additional pressure these engagements could exert on affected commodity prices, particularly oil.
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Between a Rock and a Hard Place
Geopolitical risk has moved to the forefront with the surprise attack by Hamas on the state of Israel. The incursion now forces the West to expend resources on two wars, stretching military capabilities and defense supply chains.
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Tension and Growth At Odds
China continues to struggle in efforts to revive its economy while simultaneously dealing with an overleveraged real estate sector in “work out” mode. The country’s malinvestment in real estate has been recognized for years, but developer loans are now coming due with several on the brink of default.
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Rising Tides Lift All Boats
Japan’s long-running modern monetary experiment appears to have reached a major turning point, one that may have serious ramifications for financial markets going forward.
