Energy

Investors should buy protection against further volatility. The shakeup in early August was a taste of things to come. The US election is a pivotal moment in modern history that will drive up uncertainty, while other countries take advantage of US division and distraction.

The decision by GeoMacro team on July 2 to short USDJPY and underweight equities has proven to be prescient. We still do not like the market setup from here on out. A recession would, obviously, be negative for risk assets. But even if investors avoid that scenario, the transition from cash- to leverage-driven growth is unlikely without a significant Fed rate-cutting cycle.

The market is pricing in a soft landing, but we see growing signs that the global economy is faltering. Investors should be defensively positioned.