Geopolitics

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.

Chinese social unrest will be suppressed first, then the government will relax policies to stabilize the economy. We are reducing our 4Q22 Brent forecast to $85/bbl as a result of the short-term negative news, but maintaining our $116/bbl forecast for next year.

Today, we are sending you the BCA annual outlook for 2023. The report is an edited transcript of our recent conversation with Mr. X and his daughter, Ms. X, who are long-time BCA clients with whom we discuss the economic and financial market outlook for the next twelve months toward the end of each year.

Stay defensive until recession risks are verifiably dispelled. Favor government bonds over stocks.

Go long the Kensho Space index over a cyclical horizon on the back of growing public and private investment, rising national security interests, declining sector costs, and heightened geopolitical risk.

Stocks will only get temporary relief from gridlock. Inflation will abate but then remain sticky. US and global policy uncertainty and geopolitical risk will remain historically high.

Stocks will only get temporary relief from gridlock. Inflation will abate but then remain sticky. US and global policy uncertainty and geopolitical risk will remain historically high.

Expect the Middle East to create new and unexpected energy supply disruptions on top of the Russian energy shock.