Distant Drumbeats Getting Louder

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Our View

Despite an uptick in inflation, Fed-funds futures now indicate a 72% chance of another 0.25 bps rate cut in December, up from 59% just a week ago. On the geopolitical front, tensions continue to escalate. Putin is intensifying his push into Ukraine, and South Korean President Yoon Suk Yeol has declared martial law following a failed attempt to stabilize internal unrest.

In Syria, rebel groups, led by Hayat Tahrir al-Sham (HTS), which had been confined to the northwestern Idlib province, launched their offensive last week, taking control of Aleppo and advancing south towards Hama, signalling further instability in the region.

I warned over a year ago that these conflicts would grow, with the first U.S. military engagement likely centered in the Middle East, stretching our military capabilities. The current situation seems to align with those concerns, as state planners maneuver globally—Russia asserting influence in the Middle East, North Korea remaining volatile, and ongoing conflicts in Israel further depleting U.S. military stockpiles.

I hate being gloomy, but these wars are spreading and I see no end in sight. I also anticipate a significant escalation, particularly before and after Trump takes office. For now, the markets don’t seem to care, but I think they will in 2025.