Commentary
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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.
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Synchronizing Global Forces
The Russia-Ukraine conflict recently passed the 500-day mark with both sides further entrenching themselves in battle amid little signs of immediate progress.
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Unraveling Markets
The ongoing political tensions between the U.S. and China continue with both domestic corporate and asset managers struggling with the question of how best to manage that relationship within the worlds they occupy.
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Hinges On the Unexpected
With the coming of spring also comes the well-publicized Ukraine counter offensive and an uptick in global geopolitical tensions. Russia has already increased its bombardment of Ukrainian territory to fortify their positions for the coming onslaught and to degrade morale.
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AI’s Ripple Effect
Researchers from Goldman Sachs recently issued a 20-page report on generative artificial intelligence/ChatGPT and concluded the technology has matured to a point it will likely have a dramatic and substantive effect on global economic growth and labor markets in the decade ahead.
