Attack the Week (ATW)

War Scenario Analysis / Weekly Calendar / PAAM Allocation Model Update

Sunday Thoughts

Once again, I find myself writing this weekly outlook piece torn between what markets might do and what those seismic geopolitical events mean for us all further down the line. First of all, my thoughts go out to anyone impacted by the events over the weekend. I have friends in the Middle East, and they have been surprised that safe cities like Dubai, Doha and Abu Dhabi have been impacted.

Weekend markets, from what I can see, are risk-off ahead of tonight’s Asia open. Muscat’s main index tumbled more than 3% in Sunday trade. Kuwait’s stock exchange implemented a trading suspension until further notice. Saudi Arabia’s Tadawul was down nearly 1.5%, while Qatar’s main benchmark traded down nearly 2%. In crypto — the only 24/7 liquid market — perpetual swap futures tied to oil jumped roughly 5% to $70.60 per barrel, while gold and silver rose approximately 1.3% and 2% respectively to $5,323 and $94.90 per troy ounce.

These moves make intuitive sense; an attack, however, was well anticipated, even though the timing might have come as a surprise, given recent talks that seemed to signal hope for a resolution. What is the trade after the trade? This all depends on the pattern this conflict takes, as many are suggesting a quick bombing campaign and hope for regime change. This might be right, but timelines are very blurry. Let’s also not forget that markets came into this new month with pronounced vulnerabilities surrounding the AI impact theme, with significant gains seen across global bond markets.

Behind the paywall, I will go into much more detail on what has occurred and how I will be playing the markets over the coming days. We then follow the usual script, with Macro D reviewing markets, a weekly calendar and the output of the asset allocation model, which has turned bullish on bonds just in time. Will it keep its allocation? What about equities? I will keep the usual charts ready once markets have opened and we see how we progress into Monday trading.

February has been another successful month, with the buy-and-hold portfolio returning around 4%, edging close to 10% YTD without touching a single line item. In addition, Macro D’s macro FX trades have also been tracking positively, posting more than 4% in February alone (more about that below).

Let’s now dig into more details. Wishing you all a safe and successful week ahead.