Dusted off an anecdote written in the early weeks of Russia’s invasion of Ukraine, about managing extreme uncertainty, processing rapid change, searching for opportunity (see below). Back again in September with full wknd notes. All the very best, E

Week-in-Review: Mon: Fed’s Bowman signals she may not support a Sept cut, Ukrainian forces invade Russian territory – forcing mass evacuations from the Kursk and Belgorod regions, US offered to pardon Madura in exchange for acknowledging he lost last month’s election and leaving office, India CPI 3.54% (3.6%e) / IP 4.2% (5.4%e), S&P flat; Tue: DOJ considering seeking Google breakup, Musk has a ‘conversation’ with DJT on X, Trump campaign reveals it was hacked by Iran, explosions heard in Tel Aviv / Iran says it will NOT launch an attack on Israel if there is a ceasefire deal in Gaza, RFK Jr blocked from appearing on NY ballot, SBUX hires Chipotle CEO,  Japan PPI 3% (3.1%e), Australia wage prices 4.1% (4%e), UK unemp 4.2% (4.5%e) / emp chg 97k (3k exp), Germany ZEW exp 19.2 (34e), China agg financing 18.87t (19.1t exp), S. Africa unemp 33.5% (31.8%e), US NFIB small business 93.7 (91.5e), US PPI 2.2% (2.3%e) / Core 2.4% (2.6%e), S&P 1.7%; Wed: US CPI 2.9% (3%e) / Core CPI 3.2% as exp, RBNZ cuts 25bps (no cut was exp) / gov Orr said a 50bp cut was considered, Japan PM Kishida intends not to run for LDP leadership next month, Fed’s Bostic says he’s ‘open’ to a Sept rate cut, UK CPI 2.2% (2.3%e) / Core 3.3% (3.4%e) / RPI 3.6% (3.5%e), EU 2Q GDP 0.6% as exp / IP -3.9% (-2.9%e), Brazil ret sales 4% (5.7%e), S&P +0.4%; Thu: Norges bank unch as exp, Columbia University president resigns, WHO declares mpox a global health emergency, Gaza ceasefire talks resume although Hamas won’t directly participate, Walz & Vance agree to debate on 10/1, Fed’s Musalem says time may be nearing for a cut, Walmart lifts sales guidance / notes value-seeking behavior, Argentina CPI 263.4% (263.45%e), Japan 2Q GDP 3.1% (2.3%e), Australia emp chg 58.2k (20k exp) / unemp 4.2% (4.1%e), China IP 5.1% (5.2%e) / Ret sales 2.7% (2.6%e), UK 2Q GDP 0.9% as exp / IP -1.4% (-2.1%e), US empire mfg -4.7 (-6e), US ret sales control grp 0.3% MoM (0.1%e), US init claims 227k (235k exp), US impt prices 1.6% (1.5%e), US IP -0.6% MoM (-0.3%e), US NAHB index 39 (43e), S&P +1.6%; Fri: Biden announces that drug price negotiations will save up to $6b/yr, Gaza ceasefire talks continue into second day, NKY recovers losses from Manic Monday, Harris announces economic plan that includes $25k first time home buyer subsidy and price caps on food (Gold responds by surpassing $2500/oz for the first time), Hurricane Ernesto upgraded to cat2, Turkey lowers 12m infl forecast to 28.71% (30.02% prev), RBA’s Bullock says premature to think about cuts, EU trd balance 17.5b (13.5b exp), Brazil eco activity 3.18% (2.5%e), US housing starts 1.238m (1.333m exp), US UofM sentiment 67.8 (66.9e) / 1y infl exp 2.9% (2.8%e) / 5-10y infl exp 3% (2.9%e), S&P +0.2%.

Weekly Close: S&P 500 +3.9% and VIX -5.57 at +14.80. Nikkei +8.7%, Shanghai +0.6%, Euro Stoxx +2.5%, Bovespa +2.6%, MSCI World +4.0%, and MSCI Emerging +2.8%. USD rose +3.8% vs Bitcoin, +1.1% vs Russia, +0.7% vs Yen, +0.6% vs Chile, +0.6% vs Ethereum, and +0.6% vs Turkey. USD fell -2.5% vs South Africa, -1.5% vs Indonesia, -1.4% vs Sterling, -1.4% vs Australia, -1.0% vs Mexico, -1.0% vs Euro, -0.7% vs Sweden, -0.7% vs Brazil, -0.4% vs Canada, -0.1% vs China, and flat vs India. Gold +2.6%, Silver +4.6%, Oil -0.2%, Copper +3.7%, Iron Ore -8.3%, Corn -0.6%. 10yr Inflation Breakevens (EU -1bp at 1.79%, US -3bps at 2.08%, JP +4bps at 1.32%, and UK -1bp at 3.48%). 2yr Notes flat at 4.05% and 10yr Notes -6bps at 3.88%.

2024 Year-to-Date Equity Index Close: Argentina +52.4% priced in US dollars (+77.4% priced in pesos), Venezuela +50.2% priced in US dollars (+53.8% priced in bolivars), Denmark +19.2% in US dollars (+19.9% in krone), Taiwan +18% in US dollars (+24.6% in Taiwan dollars), NASDAQ +17.5% in US dollars, S&P 500 +16.4% in dollars, Malaysia +15.6% (+11.6%), Turkey +15.3% (+31.5%), Hungary +15% (+19.2%), Netherlands +14.5% (+15.1%), MSCI World +13.1% in dollars, India +12.1% (+12.9%), Greece +10.1% (+10.7%), South Africa +9.6% (+7.4%), Poland +9.4% (+7.9%), Belgium +9.3% (+9.9%), Colombia +9.2% (+13.9%), UK +8.8% (+7.5%), Germany +8.8% (+9.4%), Czech Republic +8.5% (+11.3%), Italy +8.3% (+8.9%), Japan +8.2% (+13.7%), Ireland +8% (+8.6%), Spain +7.8% (+8.4%), Norway +6.9% (+13.3%), Euro Stoxx 50 +6.5% (+7.1%), Canada +6.1% (+10%), Switzerland +5.8% (+9.4%), Russell +5.7% in dollars, Israel +5.4% (+8.1%), Austria +5% (+5.6%), Singapore +3.6% (+3.5%), New Zealand +3% (+8.1%), Philippines +3% (+6.2%), HK +2.4% (+2.2%), Australia +2.3% (+5%), Sweden +1.2% (+5.7%), Indonesia +0.3% (+2.2%), Saudi Arabia -0.5% (-0.4%), France -1.8% (-1.2%), Chile -2% (+4.2%), Finland -2.1% (-1.6%), UAE -3.1% (-3%), Korea -3.1% (+1.6%), China -4% (-3.2%), Portugal -4.1% (-3.6%), Thailand -9.5% (-8%), Brazil -11.4% (-0.2%), and Mexico -14.3% (-5.8%).

Anecdote (March 5, 2022): “Just a couple things today,” I said at One River’s internal risk meetings. “The first is an observation. Of the many Russia and Ukraine experts who dedicated decades to the study of the region, Putin, other key players, not even one expected this outcome,” I said. “Rarely when it comes to geopolitics does that happen. And when it does, it means we are entering a period of extraordinary uncertainty. So, while it is always important to approach markets and our portfolios with a great degree of humility, it is utterly critical to do so now. Don’t fool yourself into believing you can war-game this out. No one can, not even the key players, it is far too complex. People often like to say they have open minds. But the truth is very few people are capable of processing rapid change of this scale. Their thinking is anchored to the recent past, a decade, two at most. This applies equally to investors and political leaders. Therefore, we must remind ourselves that very few people who are interacting with markets and determining policy are capable of fully internalizing the range of new possibilities we must now consider. At one end of the spectrum of outcomes is a coup that replaces Putin, followed by an ending of hostilities. At the other is a nuclear conflict. There are many other possibilities we have not even considered. And during this period, assume that we will have to process information that is wildly inaccurate, intentionally deceptive, truces that come and go, cyber warfare, biological too, random volatility, etc. Our portfolios and risk management should reflect this – both market and operational risk. The second thing to keep in mind is that often in periods of great change, some very odd market behaviors appear, and these can foreshadow powerful trends that will soon emerge. The Yen is particularly weak when it would normally be a safe haven. The Chinese Renminbi is stable when it would typically be weak. Emerging market equites are surprisingly steady, Asia too. Stay attuned to unusual market divergences, prices that move in counter-intuitive ways. They don’t always lead to great opportunities, but they are the places to start looking.”

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management

Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.