Greenland

Absorbing. Given the blandness of many a press conference, it was eye-balls out for Donald Trump’s pow-wow with the reporters at Mar-a-Lago, where the President elect cat-called Denmark over Greenland, suggested he fancied getting his hands back on the Panama canal, and continued to goad Canada. He also mooted a name change for the Gulf of Mexico. All told, a little more spice than what reporters had got used to from a tired-out Biden administration. What follows is anyone’s guess, but is likely to be more of the same. More grandstanding, more bluster, more mouthing off. A period then, where markets are in thrall to the headlines and late-night tweets. Uncertainty. And uncertainty at a time when inflation continues to pulse. West Texas Intermediate is stirring, nudging $75, at a time when inventories are at record lows. Commodities more broadly are up, the bellwether index of the CRB is up almost 30% over the past seven months. Despite the clucking of politicians that inflation is tamed, the lived experience is somewhat different. Everything from olive oil to cocoa. All up. Even those who buy live cattle day-to-day are tut-tutting at the cost of it all. The list goes on. How many would be caught deep in the heels if the Central Bank had to raise rates this year, a move that would cause a something of a kerfuffle in the White House aiming to be the most beautiful administration in US history. Set against a taut geo-political set up, where the stitching of the post WWII order is being slowly pulled apart, the years to come are likely going to be marked by higher volatility. Across the board, from inflation, to rates, to policy. And in response, investors are likely to slowly re-appraise their thinking on risk premium. How much are they being paid for the risk they are taking. The ZIRP era pushed capital into all sorts of unfamiliar places, courtesy of a mood that encouraged risk taking and speculative excess. The question is how fast they do so, and what might be the catalyst.