I was down twice in Miami over the summer on some of my many visits each year and each time I had to change my trip and was delayed returning up north because of the threat of tropical storms and hurricanes. The first storm I believe named Charlotte hit and made the weather bad for driving back which added several days. And the second storm Erin became a full blown hurricane. Thankfully it didn’t hit the coast, but the extreme winds and potential track close to the shore delayed me yet again.
When down in southern Florida I got a whole new appreciation of what residents face every summer with hurricane season which I have to admit is enough to make anyone rethink the state as the ideal retirement or second home location. The heat of summer never really bothered me, but the hurricane threat is a bit different. I love Florida, but it has a certain quality of being a gigantic flat parking lot with a beach next to it—-and a parking lot is not the ideal spot to face a hurricane, lets just put it that way. I guess residents get use to this threat that occurs for a few months each year. But I can’t say I wasn’t very happy indeed to get back to the more mountainous and less hurricane effected Northeast.
Here’s my point: this site is sort of like a hurricane watch. Its goal in part is to tell you when a storm might be coming, not to tote specific stocks or make stock recommendations. A lot of times the storm will miss. But if you, like I did become more aware of the political news and take some preparations: keep the tank filled up, get some cash for emergencies out of the bank, plan some routes to take if its necessary to leave, or a back up place to stay, etc. you’ll be much better off long term. What markets require you’ll have to figure out for yourself. But at least you’ll know a storm is possible.
So let me give you a heads up on two possible storms that are brewing that should definitely be on your radar. Perhaps they’ll veer off to sea or not become hurricanes. Perhaps they are more of a threat than the markets are acknowledging.
The first is Iran and nuclear weapons. Iran after the war with Israel is not cooperating on verifying the status of its nuclear sites and following the JCPOA.The result is it looks like Europe, the E3 in particular will snapback and reimpose tough UN sanctions on Iranian oil. These sanctions are set to kick in later in September. If that happens the likely response could be Iran eliminates even the pretense of not pursuing a nuclear weapon and all cooperation with the IAEA which it has accused of helping Israel. Trump has already said that any renewed efforts to get a nuclear weapon could be met by force. Israel would no doubt do the same. Hence, the macro-political market question is whether the Middle East conflict is ratcheting down or about to ramp up once again. Iran it has been reported partially held back its attack to preserve missiles for such a later confrontation. Needless to say this would certainly to continue the metaphor be a storm for the markets. This is like one of those tropical waves off the coast of Africa–it bears watching for storm development but at this point is only a possibility. If I was the Hurricane Weather service I’d give it maybe a 10-20 per cent probability of becoming a storm this Fall.
The second storm threat is already a hurricane and the question is simply will it veer off to sea or not. I would say that the track of this storm at this point does not look good and the threat of landfall to continue the metaphor is at least 30 per cent shorter term and up to 50 per cent longer term if no peace deal is reached. Putin has not agreed to meet Zelensky and it looks like he was stalling to buy time by meeting Trump. Behind the scenes negotiations for peace led by Witkoff are continuing and hopefully will bear fruit for the peace and sake of everyone involved.
But you need to know that at the same time peace negotiations are continuing both Russia and the US are heavily ratcheting up their political machinations and leverage. A reporter asked Trump in a press conference why he hadn’t done anything like he promised to do if Russia didn’t make a peace deal and he rightfully said I’m doing plenty. First, he has placed 50 per cent tariffs on Indian goods to try to get them to stop buying Russian oil. Indian refineries are reports saying still buying Russian oil, but those tariffs will bite and may change behavior. Second, he and Bessent are both working hard to get Europe to commit to permanently shifting from Russian to American energy supplies which if it occurs, it hasn’t yet, would be a big blow to Russia. Trump has also given more powerful missiles to Ukraine and signaled he will support attacks beyond the Ukrainian theater of battle deeper into Russia. This could escalate the war further but might also add more military pressure for peace.
Russia for its part continues to go full speed ahead with its summer offensive and seize more teritory as it tries to consolidate the contested Donetsk region. But just as importantly they have tried to consolidate further their economic ties with both India and China. They want China to kick in and buy Russian oil sanctioned off the market and Xi and Putin and Modi were all making nice-nice with each other at China’s WW2 victory day celebration. This led Trump to sacrcastically tweet he hoped everyone was having fun plotting against him in China.
I doubt very much Trump will not respond very aggressively to all this and the economic threat he perceives to US interests in the BRIC alliance. The obvious thing he can do is ratchet up the oil sanctions and tariffs against the players involved. He might not out of a fear of oil prices escalating too much, causing inflation, and delaying the expected Fed rate cut he’s long been after. Perhaps the Russians think he won’t risk it or if he does he’ll then lose power in the midterms. However, I would argue on the contrary that with the mid-terms coming he might want all this to play out with still some time for the storm to clear before the next election cycle. If you’ve carefully watched his behavior when diplomatically he hasn’t been taken seriously enough, I would say a storm is coming and extreme volatility potentially is coming. He is always okay taking big risks. In any case you would be prudent to track the storm path carefully on this potential hurricane. Whether it occurs or not don’t say you had no advanced warning.
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