Geopolitical Risk Will Take Center Stage

David O'Malley

By David O'Malley | May 14, 2018

Equities seemed to find their footing last week, helped by some of the big cap technology stocks. Meanwhile, bonds got some favorable news on the inflation front and were able to absorb the new issuance from the U.S. Treasury.

In the weeks ahead, I expect the markets will be very focused on geopolitical risks – specifically, how does the multitude of current events impact trade and economic activity? This week, the rising tension in the Middle East will be in the spotlight as the U.S. opens its embassy in Jerusalem. This comes at a time when tensions are already high due to the U.S. announcing it would be leaving the Iran nuclear accord. I’ll be keeping a close eye on the price of oil, with crude trading at above $70/barrel.

The continuing trade dialogue between China and the U.S. will also be in headlines this week. I expect some “deal” to be reached in the shorter term to ease some of the escalating tensions going into the June 12th meeting between the U.S. and North Korea.

My expectation is that risk markets may have more good news from these events over the next few weeks.



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