MAXIN ADVISORS Weekly Market Review adresses the issues of the moment and our views for the markets ahead.
Our Strategic Roadmap for 2024
The beginning of December is a good time to make projections for the coming year and this article details what we see happening in 2024 in the major asset classes of the world financial markets.
2023 has been an amazing year, a year of excesses, a year of extremes and a year of disconnect. It has also been an extremely volatile year starting that saw the influence of algorithmic trading dominating every segment of the financial markets together with retail speculative activity through the options markets while sentiment cycled considerably from bearishness to bullishness several times over the year.
It was also the year where the AI bubble unfolded, leading to unprecedented moves and extreme concentration of positioning in only a very limited number of technology mega cap stocks, taking them to valuations never seen apart from the times of the Dotcom bubble and just before the Great Financial Crisis.
2023 was also a year of extreme disconnect between the assessment of market participants about the future evolution of macro trends and the projections of every macro economic models for those same trends based on history, namely the hopes that Central Banks around the world will succeed at taming inflation with the sharpest monetary tightening in decades without causing an economic contraction afterwards.
This was particularly evident in the US where the economy proved to be far more resilient than most expected, delivering a stellar 5.2 % growth in the 3rd quarter of the year, thanks to considerable Government spending on one hand and the resilience of consumers who depleted their savings and increased their level of debt to record levels regardless of sharply higher interest rates and financial costs.
It was far less the case for Europe that is clearly contracting already, with Germany, France and the UK contracting or not growing at all while Japan started contracting as well despite hugely accomodtauve monetary policies and a sharp decline in the value of its currency.
Clearly, 2023 was a year where global inflation declined significantly under the combined impact of the base effect and sharply lower food and energy prices, leading Central Bank to reach a pause and even probably a peak in their monetary tightening campaign. But for now, the jury is still out on the future course of inflation even if the chances are that we should soon see a shift from inflation to deflation ahead.
2023 was another bad year for China that is decidedly shunned by investors despite a relatively resilient domestic economy that is still hampered by its real estate crisis.
In addition, 2023 was the year where geo-political risks increased markedly with the development of a new regional conflict in the Middle East in addition to the stalling war in Ukraine. Military expenditures skyrocketed around the world and a significant loss of US geo-political influence unfolded with countries as diverse as Japan, Germany or the Arab World and Asian Nations re-building their national military capabilities.
In equity markets, we end 2023, or at least as at the time of writing, with the US SP500 up + 18.5 %, the US Nasdaq up + 49.5 %, the German Dax index at an all-time high, having added + 18.5 % and Japan’s Nikkei 225 ring high towards its 1989 all-time high with a +29.5 % performance year to date. By contrast, China’s domestic index CSI 300 is down -3.84 % year to date and the Hong-Kong listed HSCEI Index down – 14.5 % ove the same period.
Emerging markets posted a meagre + 2.7 % increase but India outperformed strongly with a + 16.8 % performance year to date.
Despite a rebound since October, global bond markets had another terrible year with long dated US Treasuries losing -33.5 % this year and German10- year bonds losing -21.5 %, as bond yields surged for the second year in a row. The disconnect between the performance of bond and equity markets has been striking and is relatively unique in history, making 2023 an interesting case for economy students in the future.
Quite amazingly, Oil prices are ending the year almost flat after significant moves during the year, soft commodities declined by 12 % on average while Gold is ending the year at an all-time high having added 10.5 % year to date.
When it comes to currencies, the US dollar Index is ending the year exactly where it started after having fallen in the first part of the year, rallying strongly over the summer, only to weaken again as investors started factoring in the end of monetary tightening in October. The big stories in the currency markets were the 12 % decline of the Japanese Yen and the 5 % decline in the Chinese Yuan.
Our Roadmap for 2024
2024 will all be about the resilience of the Western economies following the sharpest monetary tightening in modern history and the largest accumulation of debt ever seen. But will also be about China’s ability to sustain economic growth, harness the consequences of its real estate crisis and restore confidence in its financial markets.
It will also be an election year in the US and in Taiwan, with significant implications for domestic policies and the world geo-political scene.
1. US and Western Economies in a Disinflationary Bust
At this point in time, most economists expect the US economy to remain resilient, avoid an economic contraction and start growing again beyond what they see as a soft landing.
Unfortunately, we disagree with this view and we are not the only economists to see a much darker outcome ahead. We are actually not the only ones as all the models used by Central Banks and most research firms point to economic contractions in 2024.
Today, there is a sharp disconnect between the market narrative of a soft landing and the hard facts projected by time-tested models, but this is neither new nor surprising; history shows that the narratives are always more bullish than the models at the beginning of an economic downdraft as analysts need to see the hard facts to accept the reality that the models have projected.
These are the reasons why we the US and Western economies weakening by Q2 2024.
1. The deflating of the global real estate bubble
Our readers may be surprised, but the first and most significant macro trend is actually real estate prices.
Over the past 15 years, ultra accommodative monetary policies have kept short and long term interest rates to abnormally low and even negative levels, enticing households to pile into real estate investments and developers to launch massive housing and commercial developments.
As a result, real estate prices have skyrocketed in most developed economies.
In the US, house prices have more than doubled since the previous 2012 through and increased by 72 % in the UK and around 40 % in France and Japan.
Since early 2022, short and long term rates have surged taking mortgage rates from 3 % to a peak of 8 % earlier this year in the US and from quasi- zero % to 4.3 % in Europe, making affordability that much more unattainable.
As the above charts show, in almost every country apart from the US, house prices have started declining, but the most important indicator at this stage is the sharp decline in home sales, with new home sales having rolled over and existing home sales collapsing in the US as well as in Europe.
The dynamics of the real estate market are such that when things turn down, sellers tend to resist lowering their prices leading to a decline in transactions and then finally accept to lower their prices as they see prices continuing to soften. Declining sales always herald lower prices ahead.
This is exactly the stage we are at and we see sharply declining real estate prices in 2024 as this dynamic unfolds. Please note the behaviour of all the indicators after the 2006 peak in US real estate that led to the Great Financial crisis.
Real estate markets go through extended bull phases of 7 to 12 years and bear markets fo 4 to 5 years, and we are at the beginning of one of those bear markets on a global basis in the Western World.
As we all know, Commercial Real Estate is already in a deep crisis in the US under the combined effects of the secular shift towards work-from-home and rising interest rates. The depth of the Commercial Real estate crisis in the US is incidentally posing a systemic risk to the banking sector.
From a macro-standpoint, Real Estate matters because it is the largest component of household’s wealth and acts on economic activity through the “wealth effect”. When real estate prices rise, households feel richer and consume more. When real estate prices decline, they feel poorer and cut back on their consumption.
To give a sense of the importance of real estate for the economy, the total value of U.S. homes was USD 45.3 trillion at the end of 2022, down 4.9% ($2.3 trillion) from a record high of $47.7 trillion in June 2022, according to Redfin. That was the largest June-to-December drop in percentage terms since 2008. Since then, prices climbed back but they are rolling over again.
In the last bear market which lasted 6 years between 2006 and 2012, real estate prices declined by 26 %. At today’s value, such a decline would shave US$12 trillion from US household’s wealth.
History shows that EVERY real estate bear market leads to an economic contraction and this time should be no different, and probably even worse considering the brutal surge in mortgage rates that will gradually affect mortgage resettings, eating that much more from households disposable incomes.
2. From Inflation to Deflation in the first half of the year
As we all know and as we predicted, inflation has been falling sharply in 2023 due to the base effect and sharply lower food and energy prices.
We see this trend continuing in the first half of the year as the shelter component of inflation starts easing and the job market softens. In October 2023, the US headline CPI index declined for the first time after a quick blip at the beginning of the year but we see that trend accelerating ahead.
However, we are of the view that inflation may prove to be far more resilient in the long term than most people think and would not exclude a renewed bout of inflation in the second half of the year. Inflation trends are long-lasting trends and after 40 years of disinflation, the structural trends of inflation have all turned in 2021. De-globalization, re-armament, commodity super cycle and fading technology productivity gains.
Moreover, we believe that in the second half of 2024, inflation may well come back through higher energy and food prices. – See below –
3. Monetary Policy is deeply restrictive and acts with a lag
The big monetary tightening campaign started in January 2022 and accelerated markedly in the summer of 2022.
With inflation rates having fallen toward 3 to 3.5 % Real Interest rates are now SHARPLY POSITIVE – 5..25 % – 3.25 % – and this for the first time since the Great Financial crisis of 2009.
Positive real interest rates act as a dampener for demand for credit, particularly at a time where inflation is positive and hampers consumption. More over, as inflation rates continue to fall in the 1st and second quarters of 2024. real interest rates ar bound to rise further.
It usually takes 18 months to two years for monetary policy to start impacting economies and we are right at the stage where its impact should start being felt in the first half of the year,
4. Most of the indicators we follow point to weakness ahead both in the US and in Europe.
in the US, the Leading economic indicators have been signalling trouble since early 2022, the longest stretch in a decade . Continuing jobless claims have risen sharply in recent weeks as hiring has slowed. This coincided with student loans repayments resuming in October, the lagged effects of rate hikes, and the real estate industry recoiling.
Personal savings rates are hovering near all-time lows ….
…while Household debt is reaching new all-time highs at USD 17 Trillion
Credit Card outstanding balances surged in 2022 and 2023 despite rates at 22 to 24 %
Auto Loans as well
and mortgages that have increased by 50 % in 5 years whiles rates have more than doubled
As a consequence, US consumers are living on borrowed time… Future consumption is competing with present consumption, and Americans are eating their seed corn. At some point, low savings rates, high indebtedness and a softer job market will push the US economy into recession by the second quarter of 2023.
in Europe, the four larbgets economies are teetering on the edge of recession
And there is not much to pull them higher in the coming quarters… Declining real estate prices and higher interest rates combined with budgetary constraints will keep a lid on both consumption and investment in 2024.
Europe is different from virtually every other economy by the intensity of the energy price crisis it suffered last year due to Russia’s invasion of Ukraine. This means that headline inflation has collapsed after peaking in double figures.
As a result, expectations for lower rates have surged
and the market expects the European Central Bank to lower rates faster than anywhere else.
The problem though is that in macro-economic terms, there is still more trouble ahead than any immediate recovery and the lag will be felt in the first half of 2024. Money supply indicators are spelling trouble..
When all is said and done, the US and European economies are entering the Disinflationary Bust phase of the economic cycle, with inflation and interest rates coming down, but economic activity coming down as well before reaching a through.
2. China in a Disinflationary Boom
2023 has been a bad year for Chinese equities, with the domestic market facing by -3.8 % and the Hong Kong listed stocks by -15.5 %, the most underperforming market despite relatively positive economic numbers.
China is suffering from a confidence crisis but its economic numbers are actually improving.
China is expected to meet the government’s 5 % GDP target in 2023, due mainly to a strong rebound in consumption compared to a lockdown-hit 2022.
GDP Annual Growth Rate
To give a sense of how consumption is improving, China’s retail sales of passenger cars reached 2.08 million units in November, an increase of 26 percent year on year, according to data from data from the China Passenger Car Association. Total sales of passenger cars rose 5.3 percent year on year to exceed 19.34 million units in the first 11 months of the year, making it by far the largest automobile market in the world.
Production of passenger vehicles topped 2.64 million units, up 25 percent year on year in November. and a new record high.
Even more telling, Chinese made cars are now starting to fin their way into foreigh^n markets. Exports of passenger vehicles soared 50 percent from a year ago to 378,000 units last month, with new energy vehicles accounting for 23.5 percent of the total.
As we argued all along, the Chinese economy is maturing and economic growth is now driven by doenstuc consumption rather than exports.
Looking into 2024, this week, China’s top leaders pledged to strengthen fiscal support and emphasized the importance of economic “progress” at a meeting Friday that supported economists’ expectations for a growth goal of around 5% for next year. The Politburo, comprising the ruling Communist Party’s top 24 officials and chaired by President Xi Jinping, announced after the gathering that fiscal policy will be stepped up “appropriately,” the official Xinhua News Agency reported. This means that China is ready to use fiscal stimulus more aggressively and accept a higher budget deficit than its average 3 % per annum.
We have constantly made the case that the hold of China’s Communist Party over the country relied on the need to improve the life of the Chinese. This view was vindicated this week with the Politburo’s introduction of a new slogan — “use progress to promote stability”
The Politburo’s call for the government to “act within its capabilities” to improve people’s livelihoods confirms that the Government is fully aware of the confidence crisis that is hitting the country following its 2002 decision to quash real estate speculation. The resulting property market slump translated into record-low consumer confidence which itself have dragged on economic growth. The Chinese are feeling poorer, they restrain their spending on unnecessary items and leading Beijing to increase fiscal support as the year continued.
The key message from Friday’s meeting is that economic growth is becoming the most important priority to policymakers.
The final Economic targets for 2024 will be set at the Communist Party’s annual economic work conference, expected to be held later this month.
As the latest data shows that China is entering deflation, monetary policy is expected to become even more accommodative.
At the same time, the sharp decline in the value of the Chinese Yuan is making export more competitive.
Politically, Xi Jing Ping latest meeting with Joe Biden has set a course for more cooperative relationship between the two countries and a clear desire to avoid any military confrontation with the US:
The Taiwanese Presidential elections on January 24th will be a turning point for the situation in the China straits.
The next two months will be crucial for China with the all-important CCP formal approval of the economic plan in December and January selections in Taiwan.
We expect the Chinese economy to sustain its momentum with the help of accommodative monetary policies and more aggressive fiscal policies.
We expect market reforms to boost confidence, including potentially, a ban on short selling in Chinese equities, and a drive of the Government to entice the Chinese to shift large parts of their savings in cash and bank deposits into equities.
1. Major breakout in Gold and Silver
After the aggressive rally into late October that we accurately predicted, gold hit our suggested next higher trading bottom, where we argued that with the mid-November low in place, it would be just a matter of time before we see a major breakout in gold.
Last week, gold hit a new all-time high where we took profits, and we expect a near-term pullback into December.
However, from a cyclical aspect, the break of the August 2020 top triggers a new investment buy signal valid into the second half of the decade. In this context, we see any near- term weakness just as a position washout, where without having seen any contrarian signals and taking into account the recent pattern breakouts in gold mines, we think the real breakout in gold is still ahead, where we remain aggressively bullish into Q1.
The key message here that last week’s break of 2072 is the formal trigger of a new investment buy signal in gold valid into 2028, which is the next major 8-year cycle top projection with a target at USD 8’000.
For 2024, we see Gold reaching 2400 and 2700 before pulling later in the year with SILVER OUTPERFORMING
2 . Oil to rise to 116 / 120 in the first half of the year
As in many segments of the financial markets, commodity prices and oil prices in particular are far more determined by CTA’s and algorithmic trading than by fundamentals. The size of speculative positions in oil through the future and option contracts dwarfs the activity and positioning of the major oil companies and the large swings in the commodity are determined by technical analysis.
From a fundamental standpoint, it has been our case for many years now that oil demand is currently peaking on a secular basis at around 102 Million Barrel/days, with massive investments in wind and solar energy, the revival of nuclear energy since the war in Ukraine and the secular shift from traditional Internal Combustion engines to Electric Vehicles. Climate change pressure is intensifying and the drive to replace fossil-fuels by cleaner energy – including nuclear – will continue to increase ahead.
From a cyclical standpoint, with the Western economies bound to weaken ahead, demand for oil is also bound to decrease in 2024.
Against this negative backdrop, two of the world’s largest oil producers, Russia and Saudi Arabia, are ready to cut production to sustain prices above USD 80 to fund their strategic priorities, military spending in Russia and strategic investments in Saudi Arabia, with the United Arab Emirates also keen on maintaining high oil prices.
The oil rich countries are fully cognisant that oil is the energy source of the past and that they need to maximise the value of their massive reserves in the coming decades.
Finally, from a more global standpoint, we started a new commodity super cycle in 2020 that will last way into the coming decade and that will support commodity prices in general.
As our readers know, we have been trading oil for years with a high success rate at determining turning points.A
As we stand today, we see Oil prices attempting to post a marginal lower low in the coming weeks before starting a new rally towards USD 118 in the first half of 2024
3. Government Bond Markets to Outperform in 2024
We highlighted and timed the fact that Government Bond markets made a very significant multi-months bottom in October 2024 – see A STRATEGIC ENTRY POINT FOR US BONDS – and since then they have risen sharply, with yields on the US 10 year Government bonds falling from 5 % to 4.22 % at the time of writing.
Government bond markets will be supported in 2024 by the combined effects of lower inflation – see above – and the coincident weakening of the western economies. They may even accelerate upwards if, as we expect, equity markets fall sharply in the first half of the year.
Tactically, we have taken profits on our long bond positions and expect bond yields to rise again in the coming weeks towards 4.6 / 4.7 %. That will be the time to go all-in into US Government bonds with ultimate targets at 3 % and even 2.5 % in 2024 if equity markets do experience a crash.
Translated into the TLT ETF, our main instrument for investing in the asset class, we see prices falling back towards 86 / 88 before rising to 120 in the first half of 2024.
We are far less confident with European bond markets where we see inflationary pressures still a danger, particularly if energy and food prices start rising again as we expect, and also because the European central Bank is far less likely to ease policy ahead.
Finally, High Yield corporate bonds had a significant rally in November and are giving signs of a long term bottoming process. However, we expect more volatility ahead as we see more bankruptcies and growing stress in the credit markets that could have a domino effect on the corporate bond markets. We are therefore more comfortable sticking to Government bonds in general, apart from special situations, particularly in the Utilities and Telecommunication segments..
4 . US equities in the FINAL blow-off phase before a major bear market unfolds in 2024.
We have written at length about the irrational speculation, unique concentration and extreme valuations reached by the AI related and technology US mega caps and have highlighted many times that we have all the conditions in place for a dramatic fall in US equities in the first half of 2024 at the latest, and maybe even a significant crash.
After the massive November rally driven by hopes for a quick ending of tight monetary policies, Investors have become extremely bullish again and are all-in in equities with speculative activity having reached extreme levels again.
The risk indicators that we monitor have delivered a very rare signal with both shorts term and medium term risk indicators reaching extremes never seen AT THE SAME TIME. last week … This is a very unusual set up.
The individual AI-related stocks are all in the last phase of their stellar advances since April 2023 and some of them have already rolled over, and all the main tech mega caps are in the same patterns with a major secular peak in process.
From an index point of view, last Friday’s testing of the 4606 resistance level means that the likelihood of a retest of the Dec 2021 all-time high at 4800 or EVEN higher towards 5200 has become more probable going into the first half of 2024, but that would mark the final top of the secular bull markets that started in 2009 and 1932, opening the way for a decade long secular bear market in US equities.that will take the SP500 all the way back down towards 1000 by 2032.
In the shorter term, all equity markets are deeply overbought after their massive advances since the end of October and will probably turn down in the coming days – Inflation data and Fed policy meeting next week – with a retrace down that should take the SP500 back down to at least 4400 and even potentially 4100 by the middle of December before the year-end seasonal bull trend resumes.
Interestingly enough, on a more global basis, the Nasdaq 100 has actually less upside potential than the SP 500, testifying of the global loss of momentum of the magnificent seven…
and it is unlikely that we are seeing a new sustainable rally in US equities due to the macro environment, weak earnings growth and extreme valuations.
The configurations of the Dow Jones Industrial and of the Russell 2000 are not supportive of major new highs ahead and confirm the likelihood of a correction soon.
5. European Equity Markets potentially making new highs in 2024 before a bear market unfolds.
European equity markets are trading at all-time highs despite a dire macro-economic environment and sharply declining corporate earnings. Equity markets are extremely overextended and hitting major resistance levels.
The outlook for European equities for 2024 is rather uncertain. On one hand, a new breakout to new highs in 2024 is a clear possibility, on the other hand, failure to clear the major resistances overhead would send the benchmarks back down to the lower end of their extended trading ranges.
The outcome will probably by dictated by the macro economic situation and the ability of corporations to deliver the kind of earnings growth that has been missing for now.
Many sectors are in trend ending vertical acceleration at unsustainable valuations that usually precede severe corrections. European equities will not stay immune to a sharp bear market in the US:
France CAC 40
6 . China and Emerging Markets to bottom soon and start a new secular bull market in 2024
We have detailed at length why we see Chinese equities outperforming significantly in 2024 – see above and our recent article titled Don’t miss the Chinese high speed train – with the potential for the Hong Kong Listed Chinese index to double within the next 12 months .
In the short term, we do not exclude one more bout of weakness and a potential re-test of last year’s October lows that will provide a unique opportunity to go all-in and overweight Chinese equities strategically and for the long term.
December 2023 and January 2024 will be determining months for Chinese equities with the outcome of the CCP economic meetings later this month and the Taiwanese Presidential elections in January 2024.
Emerging Markets provide a similar setup and will experience a sharp rally in 2024 after an initial bout of weakness early in the year, with very different situations within the space, India being in the late stages of its massive rally.
Later into the year, Emerging Markets ex China will not be immune to the US bear market
7 . The US dollar to weaken significantly after a short bounce from here
With the macro-economic landscape deteriorating and inflation coming down at the same time, the US economy is entering the disinflationary bust phase of its economic cycle, which entails lower bond yields and lower interest rates in the second half of the year.
As a result, the US dollar is bound to experience a sharp decline in 2024, after potentially a short bounce in the shirt term. We had accurately warned investors to sell the US dollar at 107 on the DXY Index, we could see a re-test of that level ahead, but expect the DXY index to fall towards 95 / 93 by the end of 2024.
The Japanese Yen should weaken somewhat in the short term but will then start an extended move upwards towards 130 by year-end
We see the EUR trading towards 1.16 / 1.17 by the end of next year
8. The Middle East a major geo-political wild card
As we analysed at length, the attack on Israel by Gaza-based Hamas on October 7th is a complete game changer in te landscape of the Middle East and will probably mark a turning point changing the face of the Middle Eats for ever.
For the first time, Israel is experiencing an existential threat that illustrates the failure of its previous policy of containment with regards to Iran and its satellites in the Arab world, Hamas in Gaza, Hezbollah in Lebanon and the Houthi rebels in Yemen. This decade-long policy of tolerating Iran’s satellites juts proved that rather than providing. a stable environment, it gave time an resources for the satellites to build their military capabilities and increase the threats against Israel. Likewise, we have constantly warned that Israel would not tolerate Iran’s progress towards mastering nuclear weapons and that a strike on Iran’s facilities was only question of time.
Since October 7th, Israel has been focusing on cleaning Gaza up, eradicate Hamas and free its hostages. This is coming at an extreme cots of civilians in the Gaza Strip and a major humanitarian crisis, and it is also causing destruction that are leaving millions homeless and will take years to rebuild. Despite international pressure, Israel will not stop its war against Hamas and it may take many more months, casualties and destruction before it takes full control of the strip and eradicate Hamas.
Contrary to what the international press analyses, we do not believe that this war will lead to the establishment of an independent Palestinian State. Quite the opposite… We see Israel gaining ground control of Gaza, putting the Fatah-led Palestinian Authority in charge of what will be called the extended Palestinian Territories, and strike a global peace accord with the Arab Gulf nations to rebuild Gaza and make it an economic hub where administration is Palestinian, Security is Israeli and t6he economy is Arab-led.
On the regional front, for the time being, the US has refrained Israel to enter into a global conflict with. Hezbollah in Lebanon and directly with Iran.
However, tensions are increasing markedly on the Northern border of Israel and this week saw the largest strokes against Hezbollah, where Israel is asking for Hezbollah to withdraw for the South of Lebanon according to the the terms of the UN resolution 1701 and where Hezbollah refuse to do so and maintain pressure on Israel by firing rockets and missiles into Israeli territory.
It has been our case all along that Israel will no longer tolerate the armed threat of Hezbollah at its Northern border in the future. It is therefore only a matter of time before the conflict extends into Lebanon with massive devastation for Hezbollah and the Lebanese population and infrastructure.
This weekend again, during visit to the IDF in Northern Israel, Prime Minister Netanyahu, threatened to devastate Beirut and Southern Lebanon If Hezbollah opens a second front in Israel’s war with Hamas. “We shall Beirut and southern Lebanon, which are not far from here, into Gaza and Khan Yunis,” Netanyahu said.
The same day, for the fist time since 2006, the Israeli aviation destroyed an entire neighbourhood of the village of Aitaroun in Southern Lebanon in a way similar to what is taking place in Gaza.
It will be politically difficult for Hezbollah to remain quiet and contain its activities within “acceptable” boundaries in the fae of a significant escalation of Israel’s retaliations.
Over the weekend, the Yemeni Houthis also increased their military activity and threats to the maritime waterways in the Red Sea, firing drones at French military vessels.
Joe Biden has been trying to defuse tensions and contain Israel, hoping to avoid a regional escalation, with intense diplomatic activity over the weekend.
More importantly, it has to be understood that the Oct 7th attack inside Israel is a turning point for the Israeli population where, for the first time, it feels it is no longer secure within its borders and will NEVER be secured until Iran funds, arms and trains its satellites in the Middle East.
This is an existential situation and the most consequential conclusion for a Nation that sees the building of the State of Israel since 1948 as a State and a refuge for the jews of the world.
Seen from the Israeli standpoint, the security of the state and the population of Israel is non-negotiable, not questionable and has to be guaranteed AT ALL COSTS.
Israel has the means, the ability and now the reasons and determination to do away in a final manner with the threats that it is facing and that encompasses Hezbollah first and foremost and then Iran itself and its nuclear and ballistic missiles capabilities.
It is only a matter of time before they act decisively at their Northern Border and the current escalation of tensions may be a warning sign that this could happen earlier than everybody thinks.
Such a military extension of the conflict would have a significant impact on oil prices, with devastating consequences for over-extended, overly bullish and speculative equity markets worldwide, and European equities in particular.
The volatile geopolitical situation in the Middle East is therefore a wild card in our 2024 roadmap that could precipitate the bear market earlier than we project it based on macro and technical considerations.
Hence our strategic positioning long oil, precious metals and Government bonds and short Western equity markets.
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