April 7, 2017

And the insanity continues. The terrible events of Tuesday have been followed by the US military firing a reported 59 warheads into Syria, targeting Assad’s regime. This escalation in the conflict comes at a very dangerous time indeed. While a despicable act, I’m surprised by Trump’s dramatic reaction to it – does his ‘intelligence’ know something that the rest of us don’t. Has it been proven without a doubt that Assad ordered the gas attack? Or is there the potential that it could be a false flag – used to incite anger against Assad to justify an attack, at a time when his forces appear to be gaining strength?

The truth is that war can never be won with more war – the experience across the Middle East testifies to this.  A longer-term solution will not be found by dropping more bombs. But then again, the powers that be don’t necessarily want peace and that’s where the problem lies.

The market has reacted to the escalation in the conflict with US futures down this morning. While the events to date are unlikely to impact the market materially, the uncertainty lies in how other major nations will react to the attacks.

Russia’s deputy UN envoy Vladimir Safronkov did say that the US should “Think about negative consequences” of an attack. A spokesperson has already highlighted the possibility that it was not Assad who ordered the gas attacks and that it may have been an arms depot that was hit rather than an intentional gas attack.

In terms of markets: The US market is already expensive and looks to be rolling off on a technical basis. The escalation in the conflict is likely more of a side show at this point, but could have larger ramifications further out. We continue to underweight US equities. In terms of Bonds, our timing to add to long term US treasuries couldn’t have been better, with the yield curve continuing to flatten as predicted. This trade may have a little further to go.