GeoMacro

We keep the Global Geopolitical Risk Score at 8 because there are still no ceasefires in Europe or the Middle East. Russia is provoking NATO, which will need to push back. Iran, emboldened by the lack of definitive US success, pushes its luck, which could invite a destructive response from the US. The Chinese economy remains fragile, increasing the likelihood of foreign belligerence. After the US midterm, President Trump faces fewer political constraints, allowing him to pursue a maximalist foreign policy to cement his legacy during his lame-duck period.

The Irkutsk plague scare is not yet a crisis, but if it becomes one, Russia is a bad place for it to happen.

The most bullish development for Brazil from the weekend’s elections was not the higher odds of a right-wing presidency, but the likely president’s (Flávio Bolsonaro) stronghold in Congress. Upgrade Brazilian fixed-income markets to overweight and equities to neutral within their respective EM portfolios.

The situation in the Middle East is becoming complicated. Over the past week, several events raise the odds that Brent prices could burst through their 2026 high of $126 per barrel.

President Trump is raising tariffs again, now through 2027 – and more countries will retaliate this time. While markets can climb over “Liberation Day 2.0,” investors should be wary of today's aggressive policies engendering drastic policy change in 2028.

Alternative for Germany’s election win in the state of Saxony-Anhalt is overrated.

There is no evidence that there is a run on US government bonds. All the data at our disposal, and the curated views of our bond specialists, suggest that the US bond market may have 99 problems, but a coordinated run on its safe haven status is not one.

Markets have become obsessed with the rise of global long-dated yields. To some extent, we agree with the concern. Bonds are trading on "vibes," alarmed by the incoherent US geopolitical policy. Oil prices are obviously the conduit between that policy and the markets. On the other hand, growth is also robust. As such, bond market selloff is not all just negativity. The one secular theme driving the bond market selloff that does not bother us all that much is fiscal policy. We see signs — including actual budget deficit data! — that the US, policymakers and voters alike, is starting to understand that there are limits to profligacy. As such, we would advise clients with a long term focus to begin nibbling at the hated bonds.

Our colleague Matt Gertken has penned a sober analysis on the midterms, calling for a Democratic Party sweep in 2026. It is a measured, data-driven, analysis that we encourage you to read. This quick Insight is neither sober nor data driven. It is hyperbolic and based on “vibes.”

US aerospace and defense stocks still have a structural tailwind from geopolitics, but face rising cyclical challenges from macro and market fundamentals, as well as eventual Iran and Ukraine ceasefires and political change in the United States.