Author: Greg Valliere
January 3, 2020
A VIOLENT ESCALATION OF HOSTILITIES between the U.S. and Iran is nearly certain in the coming days, a game changer that will obscure everything else — impeachment, the Iowa caucuses, the stock market rally, etc. Despite Donald Trump’s aversion to Mideast entanglements, he’s about to become a war-time president.
IRANIAN GENERAL QASEM SOLEIMANI was the most feared terrorist in the world, preparing to escalate attacks on Americans in Iraq. His forces are resented throughout the region, where there’s great anxiety over Tehran’s drive for hegemony. And now U.S. citizens are hastily leaving Iraq, where the shaky government has no power to curb Iranian-backed militias.
THIS IS EXACTLY WHAT IRAN WANTED: The imagery of a U.S. retreat in Iraq, while drawing Trump into a military quagmire that will force the U.S. protect Saudi Arabia, Israel, Lebanon, etc. Trump may not have a clear vision of an end-game — no one does — but he made an enormous decision last night: the U.S. is prepared to escalate the war in the region.
HUGE IMPLICATIONS: Global oil markets will be volatile for weeks to come. There’s a reason, finally, for caution in the stock market. Even more U.S. defense spending is certain. And the Democrats, desperate for an issue, are prepared to attack Trump’s inconsistencies in Mideast policy.
AS ON VIRTUALLY ALL ISSUES, Trump has near-unanimous support among Republicans for the Soleimani assassination, and — as usual — the Democrats chose to whine. Rather than celebrating the death of a notorious terrorist, most Democrats asked why Congress wasn’t consulted first.
WHAT ARE THE MIDEAST OBJECTIVES? The ayatollahs and Revolutionary Guards concluded that they could not get sanctions lifted, so they will seek to expand throughout the region, forcing Washington to defend U.S. allies. That’s been clear for months. For Trump’s inner circle, the goal has always been to eradicate the Iranian fanatics; that’s been clear since Trump’s inauguration three years ago.
EVENTUALLY THERE WILL BE AN UNEASY TRUCE, brokered by a third party such as France. But that’s a long, long way off; this will get worse before it gets better, as these two bitter enemies engage in more air strikes, more terrorism, cyberwarfare and attacks by Iranian proxies (who undoubtedly will target the Saudis again).
THE U.S. OBVIOUSLY HAS THE FIREPOWER to prevail in a conventional war, but the ayatollahs won’t sue for peace in any traditional way. U.S. adversaries — including North Korea — will be watching closely: is Trump an isolationist, as he proclaimed during much of 2019, or does he have the stomach for casualties? Trump’s temperament, as always, will be an issue.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2020 AGF Management Limited. All rights reserved.