Last week we mainly focused on the Fed Chair position and who would possibly fill it. Jerome Powell has been set up to be nominated for the position. He will still have to go through the Senate confirmation which should be easy, considering he was the consensus pick. The proposed tax cuts also came out last week which will call for a lot of due diligence, considering its 900 page structure.
While people stay focused on larger events, it’s crucial that people don’t take their eyes off the smaller events. It’s these smaller events that can sometimes lead to large disruptions. Some examples in the past include Castro and the Cuban Missile Crisis of 1962, as well as the Oil Crisis in the 1970’s, during a time when the Mid-East was not considered that powerful. In 1979 we had the Iran Hostage Crisis. In 1990 Saddam Hussein came out of nowhere which led to the Invasion of Kuwait. One last example is the impact Osama Bin Laden had in 2001. These are all things that were occurring while people were paying attention to larger events and, in turn, became significant disruptions in history.
Venezuela has one of the largest oil reserves in the world. Last week they announced that they were going to have to restructure their debt, or in other words, aren’t going to be able to pay it back. That is something that not many people are watching but could have a tremendous impact on bond markets and clients’ portfolios. This could also affect the oil market globally.
Energy is a hot topic especially from the standpoint of geopolitical events. The U.S. is one of the biggest producers of oil and natural gas. Technology has changed the dynamics of this. We are still the largest energy user in the world but have simultaneously become one of the largest energy producers as well.
Saudi Arabia has always been perceived to be one of the more stable countries in the Middle East. They had a large semi-coup in which they arrested high level individuals, including Prince Alwaleed bin Talal. This is also something that is flying under the radar but shows a big shift of mentality in how they deal with their monarchy.
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