Geopolitical risks for the beginning of 2019!

Geopolitics has always been the main driver in the financial markets. And this applies not only to raw materials, currencies or stock exchanges, but to the entire market as a whole. Since uncertainty or risks in any geopolitical confrontations in one way or another will affect the financial markets. We will not go far beyond the example and recall the USA and China trade confrontation, which set the mood for actually during the whole 2018.

Let’s consider several possible factors that will influence the market in early 2019.

US Government Crisis

One of the newly emerged risks was the controversy in the US government around the budget for 2019. The US President D. Trump demands money to build a wall between the US and Mexico, threatening to prolong the US government shutdown. What is the political risk for the US and the US currency. At the same time, such a radical position of Trump causes a wave of negative sentiments regarding his candidacy not only in the government, but also among his supporters.

Fed Criticism

Also D. Trump continues to speak out unflatteringly about the US Federal Reserve policy and its Chairman Jerome Powell. It also increases the political risks in the United States and undermines the seat under Trump. In the States, it has always been believed that the government and the Fed do not interfere in each other’s affairs. Or at least not as clearly as Trump does.

Trump has repeatedly spoken with open criticism of the Fed and Powell. But lately, these attacks have intensified, effectively turning into statements about the possibility of Powell’s resignation. If it is worth recalling that D. Powell is the actual appointee of Trump, whom the US President promoted to this position.

The Fed’s position represented by Powell was tough before the January Fed meeting. So the Fed continued to adhere to the policy of tightening US monetary policy despite Trump’s attacks. But after the January Fed meeting, which lowered the forecast for a rate hike in 2019, the Fed officially succumbed to government pressure. At the same time, Trump’s pressure on Powell did not ease.

Political risks in the States may take a new turn against the backdrop of uncertainty about the work of the US government and the open pressure on the Fed. And this is despite the fact that following the mid-term elections in the USA in 2018, Trump’s party lost a majority in the House of Representatives.

Thus, the main geopolitical risk at the beginning of 2019 is the political situation in the United States. Which continues to escalate around US President D. Trump. At the same time, Trump continues to lose support both from the population and in his party. As a result, the possibility of impeachment of Trump, could become the main geopolitical risk of 2019.

In the next article, we’ll look at the risks of the United States and China trade confrontation, which escalate into spy games and Brexit, which is the only way out for the UK.

Anton Hanzenko