Written by: David Omakwu

‘’We may never know where we’re going, but we’d better have a good idea where we are’’

-Howard Marks

Investing is an interesting endeavour in that it has so many old magic tricks repeating as new magic tricks. The factors that make or mar an investor’s portfolio outcomes – market shocks, human psychology, and euphoria are repetitive yet, their impacts vary with each market cycle. The intelligent investor knows to keep his cards close to his chest and not dance to market noise. While easier said than done, history shows it is achievable. My argument here is this: market disruptions will always manifest in different shapes and forms in all investing climes, but the successful investor is one who remains disciplined, sticking to a plan or strategy for approaching the market and adapts in response to market changes as needed.

The world today is grappling with wars in the Middle East, Europe and Africa. Assets prices- from agricultural commodities to crude oil and a plethora of precious metals have experienced significant swings over the last few years. Nevertheless, the most significant changes currently stem from the political rhetoric across North America and Europe where conservative governments are increasing their footholds. Their resurgence of isolationist and protectionist policies-a ‘’new-old magic trick’’ echoes historical precedents. Peeking into past data when the world faced similar ideologies, we can deduce the direction for our current portfolios adjusted for current trends:

1. Bond Yields: Navigating Policy Divergence

We anticipate a moderate drop in bond yields through the first half of 2025. Although the FED has strongly argued its policy stance and independence in recent times, it has historically capitulate to political pressures. The US government appears to favour a weaker dollar to encourage exports yet, the dollar’s value is still high, and the FED is currently cutting rates in line with her mandate of bringing inflation back down to 2%. This dichotomy in economic policy direction in our view, will keep bond yields decelerating for the first half of the year until such economic policy misalignment is resolved and the economic priorities converge.

2. Emerging Markets: Capitalising on Shifting Frontiers

Emerging Markets economies like India showed strong uptick in their economic yields on equities especially after the Covid crisis. We also saw manufacturers searching for new manufacturing frontiers during the recent trade war between the US and China. Considering this, we expect capital will move to new economic zones (emerging market economies) i.e. tax havens, labour havens and neutrally political regions. Investment destinations on our shortlist include Turkey, South Africa, Switzerland, UAE, Saudi Arabia, Greece and Italy in no order. We expect capital influx into these countries or trade risk to be mitigated as asset prices in these regions may offer value as geopolitical hedge.

3. Currency Volatility: Opportunities in Turbulence

Furthermore, building on our emerging market thesis, we see a great deal of opportunities in emerging market currencies. Throughout the first term of President Trump, we had a most remarkable performance in our currency trading desk. Currencies during this period experienced large volatility swings. These swings for a seasoned trader presented opportunities for outsized gains. These volatility of themselves are not random or uncorrelated to market forces or risk. Applying proper risk management, you can position your currency trades to gain outsized returns on your investment. Nevertheless, it is imperative to remain vigilant and exit positions at the first sign of adverse political or economic developments.

4. Commodities

In the commodities market especially for Brent crude and gold, we forecast reasonably high price swings. This, we believe, will be another means of mitigating the geopolitical and financial risk associated with the current political rhetoric across Europe and America. We saw significant increases in the price of gold in 2023 & 2024. We expect a pullback in 2025 in the price of gold due to a potential resolution of the Ukraine–Russia war, given President Trump’s history of pursuing major geopolitical victories and we don’t see Europe carrying the burden of the war on itself as much as the US has since the beginning of the war three years ago. Conversely, we do not see the same fortunes for Iran and its proxy armies in the Middle East region. We envisage significant disruptions to Iran’s economy with more sanctions on her and its proxies and significant military violence towards its infrastructure, especially her nuclear programs. Any further disruption to Iran will reflect on Brent crude prices globally. The only offset to this will be how swiftly we can get Russian oil back to the market at full capacity. So, in the short term, we expect significant disruption in oil prices in the upward trajectory.

5. Cryptocurrency: Speculative Frontier

We have seen some incredibly outsized returns on our experimental investments in this space. The returns in this sector are significantly higher than those of most traditional portfolio assets. market timing and sentiment analysis are the outliers in this market. This market is a speculator’s dreamland.  We are strategically building our trades in this sector, leveraging the optimism surrounding the Trump administration’s pro-crypto stance. With expectations of significant deregulation in the coming months, we anticipate increased market participation and a surge of capital into the space. The introduction of Bitcoin futures allows us to trade this asset in a more traditional manner, despite its non-traditional nature.

Investing is one of the most thrilling and exhilarating endeavours of humankind. It creates an opportunity to take full advantage of the folly of mankind at any particular period in time. Investing also tells the tale of the exuberance of the human condition when looked at as a unit in itself. It also emphasises the triviality of man’s actions for one can gain financially from something as serious as wars or natural disasters. Investing is all of these and more but, I see investing as man’s insurance claim on his earning power. It’s a way to hedge against the unforeseen financial risks beyond his immediate control such as inflation and others as mentioned above.

Looking at the opportunities presented in our current investment thesis, it does not mean that we are negligent to the human suffering brought about by wars or other unfortunate situations but, we place our portfolios to see the light at the end of these dark tunnels. As President Trump assumes global leadership, we remain optimistic but indifferent in our view for the future of America and the world at large. We are also keeping a keen eye to outcomes of political changes in Canada and Europe within the year.

In investing when changes take place we might not exactly know where it will take us or the results we will get, but, having a solid plan and working with the available data at hand positions your portfolio for outsized gains, whatever the investment climate.