In the first part of our assessment for 2025, our emphasis was ontroubling spots that could generate turmoil in the markets (such as oligopolistic and oligarchic structures that cancel market forces, inflationary built-in structures, unrestrained/unfounded optimism, wrong assumptions about the dollar, etc.). In this part, we’ve chosen to contemplate the market outlook using Virgil’s epic Aeneid.
In his epic poem, Virgil – following in Homer’s steps – tells us the story of Rome starting with Aeneas leaving Troy and ending with the establishment of the Roman Empire and the subsequent Pax Romana under Octavian/Caesar Augustus. Virgil’s commission by Octavian had to meet the historical, philosophical, aesthetical, and religious standards set by Homer in Iliad and Odyssey. Analysts nowadays tell us a story of emulation where the roaring 2020s will imitate the roaring 1920s. We all know that the roaring upswing of the 1920s ended up in the ashes of the Great Depression.
Between Homer’s epics (late 8th/early 7th century BCE) and Virgil’s epic (29-19 BCE), the world witnessed Aeschylus, Sophocles, and Euripides. Aeschylus taught us how to contemplate the forces of history and fate. Sophocles focused our attention on the character and passion that drive humans to ruin. Euripides presents his heroes as more brutal and less noble, and the gods as more distant, inscrutable, and somehow vengeful. The recurring theme of the tragedians is not war or homecoming (like in Homer and Virgil) but rather the fall of a great house that destroys itself from within. Therefore, as I am drafting these lines, the question that I keep raising to myself is a simple one: Do we assess the 2025 (and beyond) outlook using the lenses of Homer and Virgil or those of the tragedians?
Odysseus’ and Aeneas’ homecoming ventures resemble the fact that the baby boomer generation will be “coming home” to retirement. Here are two hard facts: First, by the end of 2026 (maybe sooner), close to 30% of new drugs will be discovered using generative AI. Second, by 2030, about 20% of the US population will be 65 years or older. What then can we derive from those two “home coming” facts, especially when we consider that the US already spends 18% of its GDP on healthcare?
- Some emphasis on healthcare and especially biotechnology may be necessary.
- Investing in biotech companies that are using cutting-edge generative AI might bethe key for investment in the next 4-5 years.
Following the defeat of the Trojans, Odysseus sails for Ithaca and Aeneas for Italy where, according to a Roman legend, he established Rome. Before 510 BCE, both Rome and Athens were ruled by tyrants. At about the same time in 509 BCE, both Athens and Rome expelled the tyrants. Athens’ golden age started with the establishment of democratic institutions, however, enemies (internal and external) demanded vigilance and the defeat of Persia, all of which brought in the age of Alexander the Great. The beginning of the Roman Republic was marked by strong institutions (like the Senate and the elected Consuls) but also by internal rivalry, especially with those who were allied with tyrants like Tarquin. Rome was blessed to have generals and politicians like Cincinnatus and Gaius Mucius who sought to put together the needed infrastructure and who put the country overpersonal or partisan interests. Assuming that US priorities are straight, we can see that in 2025 and beyond:
- Traditional industrial sectors will gain momentum at a time of reshoring productionand rising spending by baby boomers through their retirement funds.
- The fact that residential construction is still lagging, we should not be surprised – especially if the Fed cuts rates – that residential construction (and the corresponding builders) will make gains.
- The rise in cyberattacks – especially the attempts to gain advantages in AI – may necessitate more spending in cybersecurity and thus may point to diversifying a bit into that sector with a couple of strong names.
Aeneas – like Odysseus – wanders the seas and in one of his adventures he lands in Carthage, where he falls in love with Queen Dido. Though Carthage was located in modern Tunisia, the Carthaginians were not Africans but rather Phoenicians hailing from today’s Lebanon (their historic cities of Tyre and Sidon were recently in the news as Israel invaded Lebanon). Aeneas describes to Queen Dido the fall of Troy, how he was spared along with his wife, son, and father, how he lost his wife whose ghost inspires him to reach out to the new land of Hesperia where kingship awaits him, but also how in the land of Buthrotum (a city built in an attempt to replicate Troy in the NW Greek province of Epirus across from modern Corfu) he met Helenus (Priam’s son) who foretold him of his destiny to establish the kingdom of Hesperia (Italy) as his descendants will be ruling the whole known world. As Aeneas departs Buthrotum and wanders the seas, he ends up (like Odysseus) on the island of Cyclopes. Cyclopes and danger are almost synonymous. Which are the Cyclopes we face in 2025 and beyond?
- Could the Cyclopes be found in escalating geopolitical tensions?
- Could they be found in European instability and Chinese policies that can destabilize markets?
- Could the Cyclopes be identified in a chaotic implementation of policies that could backfire?
- Who could be the rescuer from the island of the Cyclopes? In Aeneas’ case, he found one of the sailors left behind by Odysseus (Achaemenides) who taught Aeneas how to escape. Could the rescuer mechanism represent a basket of precious metals, or defense companies (especially EU-based as the EU would be forced to spend more on defense)?
One of the greatest enemies that Rome ever faced was the Carthaginian kingdom. When Aeneas left Dido in Carthage for his destiny to establish the Roman Empire, Dido cursed Aeneas before committing suicide. Dido’s curse focused on Aeneas’ descendants who will face a future full of wars. Romans referred to Phoenicia as Punis, and the battles they fought against Carthage are known as the Punic Wars. Although Rome won all three major wars against Carthage, they were almost annihilated in the second war by the great military genius known as Hannibal. Hannibal almost reached the gates of Rome and for centuries his name evoked fear for the Romans. Who could be the modern Carthaginians, and should we be concerned about a modern Hannibal?
- Is it possible that the geoeconomic conflict with China leads to tensions on the verge of a war?
- Could a reversal take place, and a major escalation of conflict erupt further in the Middle East and/or in Ukraine?
- Could Hannibal be impersonated by an alliance of autocrats who can inflict pain?
- Could precious metals and defense stocks hedge against those risks? And what about if all goes smoothly, how do we take advantage of that scenario? Could it be that cheap valuations in emerging markets and Europe become stepping stones for the years beyond 2025?
In Book 6 of the Aeneid, we find the hero in the underworld. There he meets the dead (including Dido) by the banks of the river Acheron, whose bodies are ferried across by Charon before eventually they encounter Cerberus who is the guardian of the underworld. In the underworld, Aeneas is retold of his teleological destiny: Rome’s triumph. Are there factors and market elements that could bring forth an underworld experience in the next few years? Could the market foundations be shaken, given exuberance and current valuations that could not only derail the market optimism but also inflict pain that couldshake up faith in the destiny of establishing Rome as the epicenter of global power? (The TINA of the zero rates era, a.k.a. There is No Alternative to Stocks, has been metamorphosized nowadays into the US TINA, a.k.a. the US markets are the only game in town). And if those factors and elements are real, could hedging be an option?
- Should we seriously consider imitating Buffett and keep a good chunk in cash-equivalent positions, especially if short and medium-term rates remain elevated?
- Could investment-grade corporate bonds offer a refuge in such a scenario?
Before Aeneas reaches today’s Rome, he has to fight different and dangerous enemies. In those fights and wars, he will lose friends (like Pallas) and before the Roman Republic reaches its high point and establishes its presence as the only game in town, civil strife, internal rivalries, and weakening of institutions will endanger its own position, vitality, future, and existence. By 146 BCE, Rome might have defeated all its external enemies, but the dangers were found within its own walls. An unending cycle of internal strife made Rome fall prey to squabbles of oligarchs who put their own interests over the interests of Rome. Enlightened minds like Tiberius and Gaius Gracchus were assassinated. Reforms for the poor and the average Roman failed in favor of the wishes of the oligarchs. After that, Rome was plagued by strong men like Sulla and Marius, ending in a civil war. The rule of law was abandoned in favor of the rule of the strong man. Even the triumvirate truce reached by the then two great rivals (Caesar and Pompey) was abandoned when Caesar crossed the Rubicon. The Ides of March brought Ceasar’s assassination and eventually the triumph of Octavian over Mark Anthony (his two favorite persons in the line of succession) following their battle at Actium. The Republic was dead, Octavian/Ceasar Augustus became the first Emperor whose empire ruled for the next five centuries. It all started with the Trojan Aeneas and Virgil (the flower of the golden age of Rome) at the instruction of Ceasar Augustus for an epic poem about Rome and its destiny.
- Could it be that, as we wrote last week, the trajectory of liberalism (in the classical sense) is destined to go through internal strife that could entail existential threats?
- Is there a felix culpa (happy guilt) in that trajectory?
There is some teleology in Virgil’s Aeneid. History is like a river that needs to end somewhere. Historical trajectories seek a telos/ending where the river will meet the ocean. For Virgil, the telos was Actium. Nothing could stop Aeneas from his destiny, the establishment of Rome. Nothing could stop Rome from her telos/destiny, the establishment of an empire. Aeneas is a new kind of hero, the carrier of cosmic and unstoppable forces that fulfill and bring forth the telos/destiny in the fullness of time.
A few years later, another equally well-known writer (St. Paul) would write to the Galatians about another fullness of the time that brought forth an event that changed history to this day.
Merry Christmas!
From Homer and the Tragedians to Virgil and the Market Outlook (2025 and beyond)
Author : John E. Charalambakis
Date : December 3, 2024
In the first part of our assessment for 2025, our emphasis was ontroubling spots that could generate turmoil in the markets (such as oligopolistic and oligarchic structures that cancel market forces, inflationary built-in structures, unrestrained/unfounded optimism, wrong assumptions about the dollar, etc.). In this part, we’ve chosen to contemplate the market outlook using Virgil’s epic Aeneid.
In his epic poem, Virgil – following in Homer’s steps – tells us the story of Rome starting with Aeneas leaving Troy and ending with the establishment of the Roman Empire and the subsequent Pax Romana under Octavian/Caesar Augustus. Virgil’s commission by Octavian had to meet the historical, philosophical, aesthetical, and religious standards set by Homer in Iliad and Odyssey. Analysts nowadays tell us a story of emulation where the roaring 2020s will imitate the roaring 1920s. We all know that the roaring upswing of the 1920s ended up in the ashes of the Great Depression.
Between Homer’s epics (late 8th/early 7th century BCE) and Virgil’s epic (29-19 BCE), the world witnessed Aeschylus, Sophocles, and Euripides. Aeschylus taught us how to contemplate the forces of history and fate. Sophocles focused our attention on the character and passion that drive humans to ruin. Euripides presents his heroes as more brutal and less noble, and the gods as more distant, inscrutable, and somehow vengeful. The recurring theme of the tragedians is not war or homecoming (like in Homer and Virgil) but rather the fall of a great house that destroys itself from within. Therefore, as I am drafting these lines, the question that I keep raising to myself is a simple one: Do we assess the 2025 (and beyond) outlook using the lenses of Homer and Virgil or those of the tragedians?
Odysseus’ and Aeneas’ homecoming ventures resemble the fact that the baby boomer generation will be “coming home” to retirement. Here are two hard facts: First, by the end of 2026 (maybe sooner), close to 30% of new drugs will be discovered using generative AI. Second, by 2030, about 20% of the US population will be 65 years or older. What then can we derive from those two “home coming” facts, especially when we consider that the US already spends 18% of its GDP on healthcare?
Following the defeat of the Trojans, Odysseus sails for Ithaca and Aeneas for Italy where, according to a Roman legend, he established Rome. Before 510 BCE, both Rome and Athens were ruled by tyrants. At about the same time in 509 BCE, both Athens and Rome expelled the tyrants. Athens’ golden age started with the establishment of democratic institutions, however, enemies (internal and external) demanded vigilance and the defeat of Persia, all of which brought in the age of Alexander the Great. The beginning of the Roman Republic was marked by strong institutions (like the Senate and the elected Consuls) but also by internal rivalry, especially with those who were allied with tyrants like Tarquin. Rome was blessed to have generals and politicians like Cincinnatus and Gaius Mucius who sought to put together the needed infrastructure and who put the country overpersonal or partisan interests. Assuming that US priorities are straight, we can see that in 2025 and beyond:
Aeneas – like Odysseus – wanders the seas and in one of his adventures he lands in Carthage, where he falls in love with Queen Dido. Though Carthage was located in modern Tunisia, the Carthaginians were not Africans but rather Phoenicians hailing from today’s Lebanon (their historic cities of Tyre and Sidon were recently in the news as Israel invaded Lebanon). Aeneas describes to Queen Dido the fall of Troy, how he was spared along with his wife, son, and father, how he lost his wife whose ghost inspires him to reach out to the new land of Hesperia where kingship awaits him, but also how in the land of Buthrotum (a city built in an attempt to replicate Troy in the NW Greek province of Epirus across from modern Corfu) he met Helenus (Priam’s son) who foretold him of his destiny to establish the kingdom of Hesperia (Italy) as his descendants will be ruling the whole known world. As Aeneas departs Buthrotum and wanders the seas, he ends up (like Odysseus) on the island of Cyclopes. Cyclopes and danger are almost synonymous. Which are the Cyclopes we face in 2025 and beyond?
One of the greatest enemies that Rome ever faced was the Carthaginian kingdom. When Aeneas left Dido in Carthage for his destiny to establish the Roman Empire, Dido cursed Aeneas before committing suicide. Dido’s curse focused on Aeneas’ descendants who will face a future full of wars. Romans referred to Phoenicia as Punis, and the battles they fought against Carthage are known as the Punic Wars. Although Rome won all three major wars against Carthage, they were almost annihilated in the second war by the great military genius known as Hannibal. Hannibal almost reached the gates of Rome and for centuries his name evoked fear for the Romans. Who could be the modern Carthaginians, and should we be concerned about a modern Hannibal?
In Book 6 of the Aeneid, we find the hero in the underworld. There he meets the dead (including Dido) by the banks of the river Acheron, whose bodies are ferried across by Charon before eventually they encounter Cerberus who is the guardian of the underworld. In the underworld, Aeneas is retold of his teleological destiny: Rome’s triumph. Are there factors and market elements that could bring forth an underworld experience in the next few years? Could the market foundations be shaken, given exuberance and current valuations that could not only derail the market optimism but also inflict pain that couldshake up faith in the destiny of establishing Rome as the epicenter of global power? (The TINA of the zero rates era, a.k.a. There is No Alternative to Stocks, has been metamorphosized nowadays into the US TINA, a.k.a. the US markets are the only game in town). And if those factors and elements are real, could hedging be an option?
Before Aeneas reaches today’s Rome, he has to fight different and dangerous enemies. In those fights and wars, he will lose friends (like Pallas) and before the Roman Republic reaches its high point and establishes its presence as the only game in town, civil strife, internal rivalries, and weakening of institutions will endanger its own position, vitality, future, and existence. By 146 BCE, Rome might have defeated all its external enemies, but the dangers were found within its own walls. An unending cycle of internal strife made Rome fall prey to squabbles of oligarchs who put their own interests over the interests of Rome. Enlightened minds like Tiberius and Gaius Gracchus were assassinated. Reforms for the poor and the average Roman failed in favor of the wishes of the oligarchs. After that, Rome was plagued by strong men like Sulla and Marius, ending in a civil war. The rule of law was abandoned in favor of the rule of the strong man. Even the triumvirate truce reached by the then two great rivals (Caesar and Pompey) was abandoned when Caesar crossed the Rubicon. The Ides of March brought Ceasar’s assassination and eventually the triumph of Octavian over Mark Anthony (his two favorite persons in the line of succession) following their battle at Actium. The Republic was dead, Octavian/Ceasar Augustus became the first Emperor whose empire ruled for the next five centuries. It all started with the Trojan Aeneas and Virgil (the flower of the golden age of Rome) at the instruction of Ceasar Augustus for an epic poem about Rome and its destiny.
There is some teleology in Virgil’s Aeneid. History is like a river that needs to end somewhere. Historical trajectories seek a telos/ending where the river will meet the ocean. For Virgil, the telos was Actium. Nothing could stop Aeneas from his destiny, the establishment of Rome. Nothing could stop Rome from her telos/destiny, the establishment of an empire. Aeneas is a new kind of hero, the carrier of cosmic and unstoppable forces that fulfill and bring forth the telos/destiny in the fullness of time.
A few years later, another equally well-known writer (St. Paul) would write to the Galatians about another fullness of the time that brought forth an event that changed history to this day.
Merry Christmas!