A new “D” in the D world

The new year has begun as the old one ended: The US president is dominating the headlines and while democracy and the rule of law are increasingly taking a back seat, the law of the jungle dominates. It is difficult to predict what impact all these developments will have on the markets. Although the list of risks is long, the fundamental environment for equities remains positive.

Please note: investing in securities involves risks as well as opportunities.

A number of things have happened since the beginning of the year, some of which are more and some less important for the markets:

Venezuela and oil

The USA has arrested the President of Venezuela in a commando operation. The aim is to gain de facto control of the country and secure oil production. Venezuela has just under 20 % of global oil reserves.

The impact on the global financial markets is likely to be limited, but could tend to be positive for Latin American assets (currencies, bonds, equities).

At the same time, the US is increasing political pressure on countries such as Colombia, Cuba, Mexico, Greenland and Denmark. The aim is to push back the influence of China and Russia in Latin America.

Withdrawal from international organizations and massive rearmament

The USA has announced its withdrawal from 66 international organizations, including UN-related bodies. The multilateral approach is giving way to a clear “America First” course.

More state influence on companies

At the same time, the US defense budget is set to increase by 500 billion US dollars and will amount to around 1,500 billion US dollars in the future.

Defense companies should not pay dividends or buy back shares as long as public contracts have not been completed. Instead, production capacities are to be expanded. This form of state control is strongly reminiscent of the Chinese approach.

Institutional investors will no longer be allowed to purchase single-family homes in future – a further intervention in the private sector.

Interest rates for credit cards are to be capped at 10% for one year. Although this will help many households in the short term, it could mean that particularly vulnerable borrowers will no longer have access to credit cards.

Escalation in the conflict with the US Federal Reserve

The conflict between the US administration and the Federal Reserve has come to a head. The public prosecutor’s office has launched an investigation into Fed Chairman Jerome Powell.

Powell commented on this with clear words: the central bank is acting in the interests of the public – not according to political guidelines. He said that the threat of criminal prosecution lay in not following the preferences of US President Donald Trump when it came to interest rate policy.

Geopolitics: power, influence and a new “D”

Global trends are often described with numerous “D” words: Deglobalization, digitization, deficits, decarbonization, democratic erosion, demographics, de-dollarization,…

Now it seems that a new “D” is emerging – the “Donroe Doctrine”. In the midst of a changing world order, the reinterpretation of the Monroe Doctrine reaffirms the United States’ claim to power in the Western Hemisphere.

And the economy? Surprisingly robust

In parallel to the US President’s actions and announcements, the latest economic data paints an overall positive picture for the markets:

• US GDP grew at an annualized rate of around 3% in the third quarter of 2025, with early indicators even pointing to growth of over 5% in the fourth quarter.
• At 54.4, the ISM index for services is clearly in expansion territory – indicating continued growth.
• Company profits rose by 9.1% year-on-year in the third quarter. Productivity increased by 1.9%.
• Although the global purchasing managers’ index for services has fallen slightly, at 52.0 it continues to signal trend growth.
• The IT and AI boom is continuing, for example in Taiwan with an increase in production of 16.2%.

Nevertheless, in addition to the political noise, there are still uncertainty factors for the stock markets. For example, the US labor market remains mixed. Employment is stagnating and unemployment has fallen slightly. Productivity gains have so far offset this. Global manufacturing is also only growing slightly at just over one percent at present.

China: export surpluses and deflation

China recently recorded a record trade surplus of around 2% of global GDP. As investments are declining and consumption is not being sufficiently boosted, the country is in a deflationary phase. The attempt to export production surpluses is exacerbating international trade tensions. From an economic point of view, an appreciation of the renminbi would be obvious.

 

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