Dear valued client,
Markets reacted negatively to more conflict in the Middle East this week. Geopolitical tensions create uncertainty for investors and markets will likely not feel bullish again until diplomatic relations are on more firm ground.
Iran’s unprecedented barrage of over 300 drones and missiles aimed at Israel initially sparked fears of a wider conflict. However, Israel’s defense systems intercepted nearly all incoming threats, limiting significant damage. In response, Israel launched a retaliatory strike, targeting locations in Iran’s Isfahan province, including an air force base and a region with nuclear facilities. The incident’s impact on energy markets looms large, with heightened tensions exacerbating existing concerns and driving oil prices upward. Investors brace for potential economic ramifications as geopolitical uncertainties persist.
This week marked the commencement of former President Trump’s trial regarding hush money payments, making him the first ex-commander-in-chief to face a criminal case. The trial, initiated by Manhattan DA Alvin Bragg, involves 34 counts of first-degree falsification of business records. The prosecution alleges that Trump concealed a $130,000 payment to adult film star Stormy Daniels in exchange for her silence about an alleged affair before the 2016 election. This payment, purportedly disguised as legal fees to Trump’s lawyer Michael Cohen, is under scrutiny. While the maximum penalty could lead to four years in prison, experts speculate the likelihood of incarceration is low, even if Trump is convicted. Despite initial challenges in seating an impartial jury, twelve jurors and one alternate have been selected, and once five more alternates are chosen, opening arguments will commence.
Recent discussions about the state of Canada’s economy have stirred debate among experts. While some express concerns over lagging productivity and declining per capita GDP, others like economist Tyler Cowen argue that Canada’s economic performance is solid. Cowen highlights consistent income growth and steady economic expansion as positive indicators. However, former Bank of Canada governor Stephen Poloz cautions against overly optimistic views, emphasizing the urgency of addressing low productivity levels. He stresses the importance of increased investment in technology to boost productivity, pointing out that Canadian businesses have been hesitant due to trade risks and regulatory uncertainties. Poloz suggests reducing policy barriers and streamlining regulations to encourage domestic investment. Additionally, he identifies geopolitical conflicts and income inequality as significant risks to Canada’s economy, emphasizing the need for proactive trade policies to mitigate potential disruptions.
“A 10% decline in the market is fairly common—it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealth-building power of stocks.” – Christopher Davis
Play the long game.
Have a terrific weekend,
PW
