#30 - How’s consensus going to be wrongfooted in 2024? Guest: Marvin Barth
Dec 31, 2023
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Marvin Barth from Thematic Markets joins the hosts to discuss the consensus outlook for 2024 and the pros/cons of betting against it. Topics include the ongoing war between Russia and Ukraine, the potential return of Donald Trump, debunking predictions, implications of a globalization shift on credit events, and concerns about future political instability in the US.
The West needs to consider its next steps in Ukraine as pouring more money into the country without a clear strategy may not produce desired outcomes.
The involvement of Arab neighboring countries in taking responsibility for Gaza's governance offers hope for stability and positive implications for the oil market.
Deep dives
Geopolitical Tensions and the War in Ukraine
Geopolitical tensions and the war in Ukraine have reached a point of stalemate. The initiative in the war has been shifting back and forth between Russia and Ukraine, resulting in a tragic situation with a high number of casualties. Russia currently holds the upper hand, although they have not been able to achieve their ultimate goals of a regime change in Kiev or fully bring Ukraine back under Russian control. This leaves the West with a dilemma regarding their support for Ukraine, as there is no clear vision of how Ukraine can reclaim the territories it has lost. The situation is further complicated by the long game that Putin is playing, content with the current split between the eastern and western parts of Ukraine. The West needs to consider its next steps, as pouring more money into Ukraine without a clear strategy may not produce the desired outcomes.
The Situation in Gaza
In Gaza, there are three potential scenarios for the future governance of the region. The first is a resurgence of Hamas if the Israelis withdraw completely, similar to what happened in Afghanistan with the Taliban. The second is a hardcore Israeli occupation, which is not a sustainable long-term solution. The third is the involvement of Arab neighboring countries, such as Egypt, Saudi Arabia, and Qatar, in taking responsibility for Gaza's governance. This option offers hope, as it aligns with the stronger affiliation and resources these countries have with the Palestinian populace in Gaza. The involvement of these Arab countries could potentially lead to stability and open up possibilities for a deal between Israel and Saudi Arabia, with positive implications for the oil market.
The Outlook for US Politics and the 2024 Presidential Election
The 2024 presidential election in the United States is expected to be a major focus in the coming year. While it is still uncertain, there is a high chance that Donald Trump could return as president. His strong following and social media presence, combined with the impact of Robert F. Kennedy's potential campaign, could draw votes away from President Biden, leading to Trump's victory. However, a Trump presidency may not significantly change the outlook for the Ukraine-Russia conflict. It could even accelerate tensions as adversaries perceive his administration to be more accommodative. Additionally, the US political environment surrounding the election is a cause for concern, as heightened divisions and potential violence could arise regardless of the election outcome.
Market Surprises and Outlook for 2024
In terms of market surprises in 2023, one unexpected trend was the lack of major macro credit events despite rising real interest rates. This was driven by the localization of production, leading to winners and losers in different industries. Looking ahead to 2024, the market consensus is for interest rate cuts and a potential trend of higher inflation. However, there are contrarian perspectives that suggest the possibility of higher inflation and higher long-term interest rates. Factors such as the Fed's credibility and the impact of geopolitical tensions should be considered. Furthermore, dollar liquidity and its future impacts on markets remain an important area to watch, as well as potential geopolitical instability and its effects on global trade and currency dynamics.
How are markets positioned for 2024? We discuss the consensus outlook with Marvin Barth of Thematic Markets and weigh pros/cons of betting against the consensus in various asset classes. Will the Soft Landing narrative prevail or will tail scenarios unfold in 2024?
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Hosts: Andreas Steno & Mikkel Rosenvold
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