PENDULUM RESEARCH
MAY 8, 2025
Markets continue to gyrate upward in the US, as investors blindfold and earplug themselves and mash the BUY button, despite wars and rumors of wars. Yet, the four horsemen of the market cometh. The real question is: where the four horsemen have been sent from, and where their destinations lie.
An Israeli airport here, a Yemeni airport there. Throw in a dash of kinetic water-fueled conflict between India and Pakistan. Brothers simultaneously fighting in the Kievan Rus of old and the RF of today. A showdown with Tehran undeniably looms. And of course, the main course: the PRC.
The familiar script has been jettisoned, the one in which geopolitics influences markets. Instead, markets are becoming the tool to sculpt geopolitics. Even regime change. And a parade, of dubious security, looms ahead. The pendulum is again swinging to a kind of market that Ferdinand would recognize, if only he were alive to tell the tale…
The goal? To sculpt geopolitics in a way that most suits the US. Markets can certainly be a tool to achieve that. Trade wars, embargos, and primary & secondary sanctions are just a glint of metal that sticks out in the top of the toolbox to mold markets the way the US sees fit.
No doubt – the conductor of this market orchestra sits principally in the US. The crowd – the rest of the world. But watch out for the top select VIPs at the top row of the orchestra, for the next song may be just for them.
Near term: Equity markets on the chopping block include underperformance of NIFTY-linked US ADRs vs. the S&P, Russell, et al. Conveniently, save for the well-protected TASE, most other global conflicts at present aren’t geographically located in highly liquid stock markets. Moreover, Israel has learned a long time ago how to trade a war market. Other markets have not.
Rationale: India has not fought a land war in decades, and the normalcy bias of the market has not priced this in. The Indian version of the PPT will no doubt be surreptitiously be placed into action, but this is not an indefinite force (or unlimited wallet). For even the greatest army generals have the need to sleep.
Pendulum Research
Disclaimer: The above is for general informational purposes only and is not investment advice nor does it constitute an offer, recommendation or solicitation to buy or sell a particular financial instrument. It does not have regard to the specific investment objectives, financial situation, risk profile or the particular needs of any specific person who may receive this material. Historic information regarding performance is not indicative of future results and investors should understand that statements regarding future prospects may not be realized.