Here is a summary of important events that unfolded over the last month, and which may affect economic, financial, and geopolitical issues in the months ahead. Furthermore, we share our thoughts on the market implications of the reported developments.

North America

• The strike at East and Gulf Coast ports, led by the International Longshoremen’s Association, ended after only three days when an agreement was reached between the union and the United States Maritime Alliance (USMX) on wage increases. The deal involves a $4-per-hour wage increase each year over six years, totaling a 62% raise by the end of the contract. The ports, including major ones like the Port of New York and New Jersey, will take several days to recover from the disruption, with logistical challenges still ongoing. The temporary work stoppage caused estimated losses of up to $1 billion for the Port of New York and New Jersey, with about 24 ships waiting to unload.
• The vice-presidential debate between Republican JD Vance and Democrat Tim Walz was marked by a civil tone, with both candidates focusing on policy issues. Vance, a polished speaker, defended conservative positions and avoided breaking from Donald Trump’s stances, particularly on the 2020 election. Walz, despite a shaky start on foreign policy, found his footing discussing abortion and January 6, challenging Vance’s refusal to directly address Trump’s election claims. The debate’s relatively calm atmosphere likely favored Vance, boosting his profile within the Republican Party and among independent voters.
• As of October 7th, 2024, FiveThirtyEight’s forecast gives Kamala Harris a 55% chance of winning the presidential election, while Donald Trump has a 45% chance. Harris leads by a slim margin in both the national popular vote and the Electoral College, though the race remains highly competitive, with key swing states like Pennsylvania, North Carolina, and Georgia playing decisive roles. The lack of recent, high-quality polls could lead to volatility in projections as new data is released.
• Hurricane Helene struck Florida’s Big Bend last month, but its most devastating effects were felt over 400 miles north in the Appalachian Mountains. The storm caused severe flooding across the Southeast, killing around 200 people, making it the deadliest U.S. tropical storm since Hurricane Katrina in 2005. In North Carolina’s Buncombe County, 35 people died, 600 remain missing, and mules are delivering food to survivors stranded by damaged roads. The storm dropped an estimated 40 trillion gallons of water over six states, exacerbated by warming temperatures, which intensified the hurricane’s rainfall.
• Market Implications: As expected, markets are continuing to experience volatility due to uncertainty in the upcoming presidential election, geopolitical uncertainty from the expanding war in the Middle East, and the uncertainty a potential European stagnation or Chinese hard landing could create in the midst of a dovish Fed. We maintain our conservative stance and believe that a mid-November rally in US equities could materialize after the elections. Additionally, the yield curve has normalized, with the 2-year yield now trailing the 10-year yield. This shift could prompt investors to consider extending their bond maturities, potentially going long on the bond curve.

Europe

• President Joe Biden announced an $8 billion military aid package for Ukraine during a meeting with President Volodymyr Zelenskyy in Washington, D.C. This aid includes a shipment of Joint Standoff Weapons (JSOW), providing Ukraine with medium-range missiles for precision strikes. The package also allocates funds for additional air defense systems, unmanned aerial systems, and maintenance support, and expands F-16 pilot training. Meanwhile, Russia has intensified its use of glide bombs, injuring 12 people in Kharkiv in a recent attack, as its forces have continued advancing, now occupying roughly 20% of Ukrainian territory. With over 100,000 Russian casualties, President Putin has announced plans to draft 130,000 additional troops, while uncertainty looms over continued U.S. aid, as the U.S. presidential election approaches in November.
• Austria’s far-right Freedom Party (FPÖ), led by Herbert Kickl, won 28.9% of the vote in a national election, ahead of the conservative People’s Party (ÖVP) at 26.3%, but short of a governing majority. Kickl’s party secured 57 seats in the 183-seat parliament, but coalition talks will be challenging, as the ÖVP and other parties have refused to join forces with the FPÖ due to Kickl’s divisive leadership and far-right views. The election saw a high voter turnout of 77.3%, with migration, the economy, and Ukraine’s war as central issues, and Austrian President Alexander Van der Bellen will oversee the difficult coalition formation process. Kickl has also aligned himself with other far-right European leaders, including Hungary’s Viktor Orban.
• Ratcliffe-on-Soar in Nottinghamshire, Britain’s last coal-fired power station, closed, marking the end of an industry that powered the country’s economy for over three centuries. Coal, which fueled the Industrial Revolution and Britain’s first electricity grid, began its decline in the 1980s and 1990s due to the discovery of North Sea gas and a policy-driven shift toward renewables, especially offshore wind. Britain’s transition away from coal has been faster than other G7 nations, with weeks and even months passing in recent years without the need for coal-powered electricity. This closure highlights Britain’s successful effort to curb carbon emissions by phasing out its dirtiest energy source.
• The trial of over 20 members of the far-right French National Rally (RN), including former leader Marine Le Pen, began, focusing on allegations of embezzling European Parliament funds to support the party amid a financial crisis. Prosecutors claim the RN established a centralized system to misuse these funds, while the defense argues that payments were appropriate for the job roles of parliamentary assistants. If convicted, those charged could face up to 10 years in prison and fines up to €1 million, along with a five-year ban on running for office. The European Parliament, as a plaintiff, emphasizes that European citizens and French taxpayers have been harmed by this alleged misuse of public money.
• Market Implications: Persistent weak growth and inflation have raised expectations for another rate cut by the European Central Bank in mid-October. However, some divergence in the US and EU monetary policy is creating uncertainty for investors. We continue to recommend some caution in European markets given the rising risks in the region.

Asia, Eurasia, & the Pacific

• Shigeru Ishiba, president of Japan’s ruling Liberal Democratic Party (LDP) and presumptive new prime minister, announced plans to dissolve the lower house and hold a general election on October 27 to test public confidence amid a political funds scandal affecting the party. Ishiba was elected party president from among nine candidates and is expected to be formally appointed prime minister at the upcoming Diet session. He acknowledged the unusual timing of the election announcement before his official appointment but emphasized the need for election officials to prepare. The LDP, now facing criticism from opposition parties, is led by Ishiba, who aims to address pressing national issues while facing scrutiny over the party’s past conduct.
• Japan’s destroyer Sazanami made its first passage through the Taiwan Strait, accompanied by naval ships from Australia and New Zealand, amid increasing military activity from China. The transit, which took over ten hours, was a response to concerns over China’s assertiveness in the region, including recent activities like the passage of the Chinese aircraft carrier Liaoning near Japanese territory. Following the passage, China expressed high alert and lodged a formal complaint with Japan, asserting that Japan’s actions could disrupt Sino-Japanese relations. This naval operation comes as part of a broader response from the U.S. and its allies to enhance their naval presence and assert freedom of navigation in international waters amid tensions with China.
• Myanmar’s military junta, led by Min Aung Hlaing, invited armed groups opposed to its rule to cease fighting and engage in dialogue to achieve peace after over three years of conflict following the 2021 coup that ousted Aung San Suu Kyi’s government. This offer comes in the wake of significant military setbacks for the junta, as well as the humanitarian crisis caused by Typhoon Yagi, which resulted in over 400 deaths and widespread flooding. The junta’s statement urged armed groups to abandon violence and participate in a political process, emphasizing the need for political solutions rather than military actions, while a spokesperson for the Karen National Union outlined conditions for talks, including no military involvement in future politics and accountability for war crimes. The junta has pledged to hold fresh elections, with census activities beginning in October in preparation for potential polls in 2025, despite ongoing military losses and widespread civilian unrest.
• Google announced a $1 billion investment to build digital infrastructure in Thailand, including new data centers in Bangkok and Chonburi, which will support approximately 14,000 jobs and add an estimated $4 billion to the country’s GDP by 2029. This investment comes in response to increasing demand for cloud computing in Southeast Asia, following similar moves by Microsoft to establish data center regions in Thailand, showcasing the country’s ambition to become a major digital hub in the region. In parallel, Vietnam’s government confirmed that Elon Musk’s SpaceX plans to invest $1.5 billion in the country, aiming to launch Starlink satellite services to improve internet access, particularly in remote areas, while discussions with SpaceX resumed after being stalled. Both countries are actively seeking to modernize their economies by attracting U.S. tech investments as they aim to enhance their technological capabilities and reduce reliance on traditional industries.
• Market Implications: Over the last couple of weeks, China has unveiled a series of measures designed to reign in the real estate sector, increase consumption, and boost investor sentiment. Markets have risen as a result, but we continue to remain cautious of China’s “Great Wall of Stimulus.

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