by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with some thoughts on the new war against Iran that the US and Israel launched on Saturday. We next review several other international and US developments that could affect the financial markets today, including more signs of weak consumer demand in China and a continued effort by Canada and India to reduce their trade dependency on the US.

United States-Israel-Iran: Obviously, the weekend launch of a joint US-Israeli military attack on Iran is the key news that will drive the markets today. The news has been widely reported, so we’ll just focus on the key highlights for investors. Importantly, the attacks targeted both Iran’s political leadership and its military, resulting in the death of supreme leader Ayatollah Khamenei on Saturday as well as dozens of other high officials. Nevertheless, the Iranian military has launched retaliatory strikes across the region, and military operations continue.

• Reports suggest that Khamenei dispersed political and military authority before the fighting started, ensuring in particular that the Iranian military had standing orders to keep fighting even if he were killed. Indeed, some reports suggest the Iranian Revolutionary Guards Corps is now fighting nearly independently. That could make it difficult to stop the fighting even if some political leaders or groups in Iran decide they want peace.
• More broadly, the chaos has the potential to spark secession efforts by various groups within Iran, similar efforts by groups in other regional countries, and/or intervention by other regional powers. In other words, the situation continues to pose the risk of a wider regional war.
• The main goals of the US appear to be further degrading Iran’s military capability (especially its nuclear and missile programs) and prompting a popular uprising that would lead to a new regime or at least a serious alteration of the current one. However, if that doesn’t occur within the next several weeks, we suspect President Trump would declare victory and stop the operation. We believe Trump is especially cognizant that US voters have little stomach for yet another long war aimed at regime change in the Middle East.
• All the same, military operations are notoriously difficult to control. At the moment, much risk remains, and investors are rightly on edge about further conflict and risks related to the region’s energy supplies.
• Reports this morning say Iran has now staged a drone attack on one of Saudi Arabia’s most important oil facilities at Ras Tanura and is expanding its attacks on shipping through the Strait of Hormuz. That will raise the risk of Saudi Arabia joining the attacks on Iran and potentially spur Iran to further escalate its attacks on Saudi Arabia.
• Separately, other reports say Iranian attacks have forced Qatar to shut down its liquefied natural gas production, causing global prices to soar and risking bringing Qatar into the conflict.
• As a result, global oil prices are surging this morning, with Brent up about 8.6% to $79.04 per barrel. Natural gas prices have also surged. Gold prices are up 3.1% to $5,409.40 per ounce, but Treasury obligations have weakened, probably on concerns about rising consumer price inflation. Benchmark 10-year Treasury yields as of this writing are up modestly to 4.006%. Finally, US and European defense stocks are getting a strong bid.

China: BYD, which is now the world’s largest electric vehicle maker, said its February sales were down a whopping 41% year-over-year as a 50% rise in export sales was more than offset by a 65% plunge in domestic sales. The figures show how Chinese firms’ efforts to make up for China’s weak domestic demand by going abroad won’t necessarily work. The figures therefore illustrate a key vulnerability for Chinese stocks that are heavily focused on sales to domestic consumers.

South Korea: According to new data from the Trade Ministry, exports in February were up a strong 29% year-over-year, beating expectations and almost matching the 34% rise in January. The data show that much of the strength came from semiconductors, reflecting South Korea’s strength in producing memory chips. This serves as a reminder that foreign economies and stocks are also benefiting from the surge in US data-center construction for artificial intelligence.

Canada-India: During Canadian Prime Minister Carney’s visit to New Delhi today, he and Indian Prime Minister Modi agreed to accelerate their talks on a free-trade deal, seeking to sign a pact by the end of the year. The agreement illustrates how both countries are trying to broaden their trade relationships to reduce their dependence on the US. Over time, the plethora of new non-US trade deals could potentially rejigger world trade flows and affect global stocks, although it’s probably too early to identify the winners and losers at this point.

Argentina: In President Milei’s biggest legislative victory so far, the Senate on Friday passed a major deregulation of the labor market that will make it easier for firms to lay off employees. The reform will also roll back rigid restraints on hiring and working hours. By giving companies greater flexibility, the reform could improve economic efficiency and ease business conditions. That could also help boost foreign investment in the country. Overall, the reform is likely to be positive for the Argentine economy and stock values.

US Artificial Intelligence (AI) Industry: As threatened, the White House late Friday ordered all federal agencies to halt use of Anthropic’s Claude AI model over the company’s insistence on specific prohibitions against the Pentagon using the model for mass surveillance of US citizens or the autonomous killing of foreign adversaries. The Pentagon also designated Anthropic a “Supply-Chain Risk to National Security,” preventing any company doing business with the US military from also having a commercial relationship with Anthropic.

• The big winner from the confrontation is likely to be OpenAI, which closed on a new funding round worth $110 billion on Friday and then later announced that it had reached a deal in which the Pentagon would use its AI models subject to red lines similar to those that Anthropic had demanded.
• Nevertheless, the incident is another example of how the US government has now become much more aggressive about intervening in the economy and pressuring private firms to adopt or abandon specific policies.

Global Asset-Backed Securities Market: Investors in the asset-backed securities market have become alarmed by the collapse of British mortgage lender Managed Financial Solutions last week after it was discovered that the firm double-pledged collateral on some of its bonds. The scandal echoed recent concerns about similar shenanigans in the US asset-backed markets. These incidents are likely to make asset-backed investors increasingly skittish, which would likely raise the risk of a credit crunch and financial disruptions.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our thoughts on the recent disagreement between Anthropic and the Department of Defense. We then turn to the UK by-election, examining the broader populist wave sweeping across the West. Following that, we discuss the ongoing global chip shortage, provide an update on the Iran nuclear talks, and highlight recent solar funding advocacy within the White House. We also include a summary of key economic data from the United States and developments in global markets.

Pentagon Anthropic: Tensions between the US government and Anthropic escalated this week after the company said it cannot, in good conscience, agree to the Pentagon’s demand that its AI models be available for “all lawful purposes.” The stance puts Anthropic at risk of losing a Defense Department contract worth up to $200 million and of being labeled a “supply chain risk,” potentially barring its technology from Pentagon programs and key contractors. It also leaves the company vulnerable to the risk of being compelled to comply under the Defense Production Act.

• The two sides have spent weeks negotiating over the Defense Department’s use of Anthropic’s systems for military and intelligence applications. Anthropic has insisted on explicit limits barring domestic mass surveillance and fully autonomous weapons that make targeting decisions without human oversight, while the Pentagon argues that existing law and internal policy already constrain such uses and that its contractors should not be able to veto lawful military operations.
• AI is becoming increasingly integrated across the broader economy, and Anthropic has played a particularly prominent role. Its powerful AI tools have been a major catalyst for the so‑called “SaaS collapse,” reshaping how businesses use and value traditional software. As a result, the company is widely regarded as one of the leading players in the technology sector and is becoming strategically important to the country.
• While there has been no official announcement on the government’s next steps, we see a meaningful risk that it could invoke its authority to assume control of Anthropic technology. If so, this would likely mark another step in a longer‑term shift toward a more activist state role in the economy and a further blurring of lines between the public and private sectors.
• This shift in the global economy is unlikely to have a meaningful short‑term impact on markets as companies will, for now, continue to operate in a relatively market‑friendly environment. However, this could change over the longer term, perhaps over the next decade, with firms increasingly prioritizing government demands over shareholder interests. As a result, investors might consider greater international diversification to avoid excessive concentration in any single region.

Populist Wave: A strong performance by a left‑wing party in the UK highlights the growing appeal of populist movements across the West. On Friday, the Green Party won a key parliamentary by‑election in southeast Manchester, a seat long considered safe for the incumbent Labour Party. Labour not only lost to the Greens but also finished behind the right‑wing populist Reform UK party. The result is likely to fuel concerns that Labour is losing support just a year after taking power and may also signal the emergence of a new populist wave.

• The Green Party’s election victory underscores the growing appeal of populist movements across the Western world. During its campaign, the party emphasized tackling the poverty crisis, arguing that poverty is a political choice that can be addressed through changes in tax policy. This approach mirrors that of the Reform UK Party, which similarly seeks to raise workers’ wages, though it frames the issue around curbing immigration rather than fiscal reform.
• This growing populist trend is also evident in Europe and the United States. In Germany, the CDU/CSU has come under pressure as the far-right AfD has at times overtaken it in the polls, while some disaffected centrist voters have drifted toward parties on the left. Meanwhile, in the United States, populist figures have risen to prominence in major cities; local leaders such as New York Mayor Zohran Mamdani have cultivated high-profile relationships with populist President Donald Trump.

• The ascendancy of populist movements appears to be a structural shift rather than a fleeting trend, driven by a public mandate for intervention in the face of rising cost of living. Should establishment parties continue to lose ground, we anticipate a tangible shift toward higher social spending and more accommodative monetary policies.
• From a purely market perspective, right-wing populism is often regarded as the “lesser of two evils” compared to its left-wing counterpart. This preference stems from a right-wing lean toward deregulation and decentralization, which typically lowers the cost of doing business. However, investor sentiment is not strictly partisan; as demonstrated by Spain’s Socialist Party, markets are willing to tolerate left-wing administrations provided they maintain rigorous fiscal discipline.

Chip Shortage: According to IDC, the smartphone market is expected to shrink by 12.9% in 2026 due to a shortage of memory chips. This shortage is driven by a drop in the global supply of chips needed to power new technology. The report highlights how the rise of AI is starting to have a crowding-out effect, in which the sector’s enormous demand is beginning to price out other industries. As a result, we believe the surge in demand for chips could lead to either higher inflation or lower margins for certain goods.

Iran Progress: Momentum appears to be building toward a potential US-Iran deal. On Thursday, the two sides held intensive talks on Iran’s uranium enrichment program. Tehran rejected a US proposal to transfer its enriched uranium abroad but left the issue open for further negotiation. The White House continues to favor diplomacy. Vice President Vance stressed that the US has no intention of entering a prolonged war with Iran. The parties are expected to meet again next week in Vienna.

MAGA Goes Solar: The solar lobby has partnered with conservative influencer Katie Miller and former Trump adviser Kellyanne Conway to promote solar power among right‑leaning voters. The move comes as the White House has signaled skepticism toward renewable energy, reflecting concerns about its impact on traditional fuel industries. However, growing recognition of solar as a diversified source of power, with the potential to ease pressure on the electricity grid and improve energy security, appears to have softened that stance somewhat.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with news of a deal between Republicans and Democrats in the Senate that will likely end the federal government shutdown in the coming days. We next review several other international and US developments that could affect the financial markets today, including analysis showing artificial intelligence firms are increasingly using exotic debt instruments to fund their AI infrastructure investments and data showing China has at least temporarily moved out of its recent deflation.

US Fiscal Policy: Eight Democrats in the Senate yesterday struck a deal with Republican leaders and started pushing through a bill that would end the federal government shutdown. Under the deal, the eight Democrats would provide the votes needed for a temporary funding measure lasting until the end of January. In return, the deal would reverse all the layoffs initiated by the White House during the shutdown and guarantee furloughed workers back-pay. However, it only ensures a vote on the Affordable Care Act (ACA) health subsidies that Democrats were holding out for.

• Democrats originally sought to guarantee an extension of the COVID-era ACA subsidies to prevent premiums from surging, but it now looks like they could only get a promise to hold a Senate vote on the matter.
• If the compromise bill passes the Senate, it would go to the House for its approval, which seems likely. Of course, one key risk is that the funding measure only lasts until the end of January, so another shutdown could loom in just two months if legislators can’t come to a long-term agreement on funding the government.
• In any case, the apparent progress toward ending the government shutdown and avoiding more economic damage is giving a boost to US risk assets so far this morning.

US Artificial Intelligence Industry: An important article in the New York Times over the weekend indicates that AI-related companies are increasingly turning to exotic debt instruments to pay for their massive investments in AI infrastructure. The article indicates that while many big, well-known hyperscalers and other firms initially relied largely on their own cash flow to build data centers, they are increasingly issuing asset-backed securities that can be relatively risky and harder for investors to track or analyze.

• As the AI boom proceeds, driving up stock prices for AI-related companies and spurring massive investment in new data centers, models, and other assets, we’ve seen that investors are increasingly asking whether this is a bubble that’s ready to pop.
• One likely indicator of heightened risk would be if today’s capital investment was creating excess capacity and was being financed largely by debt. At the moment, it still appears that the new data centers are being fully utilized, and the use of debt is still not especially high. Nevertheless, we think risks will increase more substantially when and if the boom starts to create unused capacity and starts to rely on large amounts of debt.

US Stock Market: New data from Charles Schwab’s STAX index of customer trading activity shows younger investors, such as those in Gen Z, have become less likely than those in older generations to “buy the dip” when stock prices pull back. The data suggests Gen Z investors have put more of their assets into bitcoin products that are now down for the year, possibly making them more skittish. Where Gen Z investors have been net buyers, they’ve focused on tech firms with solid balance sheets and positive current earnings.

• On Friday, bitcoin prices fell below the psychologically important $100,000 level.
• That means bitcoin has now given up virtually all its gains for the year-to-date.

US Defense Industry: On Friday, Defense Secretary Hegseth laid out several reforms to the Pentagon’s acquisition policies aimed at increasing competition, lowering costs, and speeding weapons development. Importantly, Hegseth said the five main defense contractors would be expected to invest more of their own capital into productive capacity and quicken the pace of innovation. The new policies, which we had been monitoring, help explain why we think foreign defense stocks are likely to outperform their US counterparts going forward.

US Meatpacking Industry: Following a social media post in which President Trump accused big meatpackers of artificially hiking prices, the Justice Department on Saturday said it has opened an investigation into collusion and price fixing among firms including JBS, Cargill, Tyson Foods, and National Beef. The “Big Four” meatpackers collectively slaughter 85% of the country’s cattle and most of its hogs, so the administration’s effort to break up their power and bring down prices could potentially lead to major changes in the industry.

United States-Hungary-Russia: After meeting with Hungarian Prime Minister Orbán at the White House on Friday, President Trump has granted Hungary a one-year extension on his sanctions targeting countries that buy Russian oil. Orbán also agreed to have Hungary buy about $600 million of liquified natural gas from the US. In any case, the sanctions exemption provides a bit of relief for Russia and somewhat reduces the impact of the new sanctions on the global oil market.

Chinese Economy: The October consumer price index (CPI) was unexpectedly up 0.2% from the same month one year earlier, just bringing the country out of deflation. Excluding the volatile food and energy components, the October core CPI was up 1.2%. The exit from deflation has given a boost to Chinese stocks today, although it’s still not clear if prices will continue to rise going forward.

• Other data today showed Chinese producer prices are still under pressure from the country’s housing glut, weak consumer demand, and excess industrial capacity.
• The October producer price index was down 2.1% year-over-year, for its 37^th straight month of contraction.

Chinese Military: In a ceremony on Friday, the Chinese military commissioned the Fujian, the country’s third aircraft carrier overall and its second domestically produced carrier. The vessel incorporates several advanced technologies, such as electromagnetic catapults that allow it to launch a greater variety of aircraft at a quicker pace. That should boost China’s ability to keep the US Navy at bay in case of a conflict in the Western Pacific Ocean. However, the ship doesn’t have nuclear propulsion like US carriers do, so its ability to project power is somewhat limited.

Japan-Taiwan-China: In a parliamentary debate on how Japan should respond to a potential Chinese effort to seize control of Taiwan by force, Japanese Prime Minister Takaichi on Friday said, “If battleships are used and a naval blockade involves the use of force, I believe that would, by any measure, constitute a situation that could be deemed a threat to Japan’s survival,” implying she would order the Japanese military to get involved.

• Takaichi today tried to soften the controversial statement, saying she hasn’t changed Japan’s defense policy.
• Nevertheless, the statement has sparked controversy in Japan, underlining Takaichi’s reputation as an anti-China hawk.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with an analysis of a potential change to the Fed’s inflation target. We then provide insights on the latest White House investment initiatives aimed at promoting its policy agenda. Additional topics include the possibility of further tariffs, the US’s financial support for Argentina, and the ongoing efforts to resolve the conflict in Gaza. We also provide a summary of recent global and domestic key economic indicators.

Soft Inflation Target? A growing number of Federal Reserve officials have signaled a willingness to consider an inflation target range, moving away from a rigid inflation target. This perspective has been highlighted in recent speeches by Fed Governors Christopher Waller and Michelle Bowman, alongside Atlanta Fed President Raphael Bostic. These comments emerge as the Fed digests the findings of its latest five-year policy framework review, which was completed in August.

• Of the three officials who mentioned a possible change, only Raphael Bostic provided a concrete example. During an appearance on the “Macro Musings” podcast, the Atlanta Fed President suggested he could favor an inflation target range of 1.75% to 2.25%. Under such a framework, the Fed would likely raise interest rates if inflation exceeded the upper limit and lower them if it fell below the lower bound.
• Adopting an inflation target range would represent a significant shift in how most central banks approach their price stability mandate. However, this model has a clear precedent. The Central Bank of Brazil successfully manages inflation with a system that includes a tolerance band of ±1.5 percentage points around its central target, effectively targeting a range from 1.50% to 4.50%.
• Additionally, the adoption of a rigid 2% inflation target was somewhat arbitrary, as the original proposal was a bit vague. The concept was first introduced by Harvard economist Sumner Slichter in a 1952 Harper’s Weekly article, “How Bad Is Inflation?”, where he explicitly proposed a target of 2 or 3%. This was a significant departure from the prevailing economic view that price stability meant inflation should average zero in the long run.
• A move to an inflation target range likely signals concern within the Fed that its current communication is ineffective. A defined range would force more pre-emptive and unambiguous rate adjustments ahead of policy meetings. However, this clarity could well have negative implications for bond markets, as a rules-based approach might limit the Fed’s flexibility in responding to unexpected economic shocks.

New Industrial State: The White House is considering acquiring a 10% stake in Lithium Americas as part of a renegotiation of its $2.3 billion loan from the Department of Energy. This potential move underscores a growing trend of direct government involvement in the economy, specifically aimed at ensuring that the US can become more self-sufficient in developing critical technologies and reducing reliance on foreign supply chains, particularly from China.

• This action is the latest example of growing integration between the public and private sectors. It follows a similar deal with Intel, in which the government also took a 10% share in the company. This emerging practice suggests that the government may be seeking greater control and a direct return on investment for companies receiving significant public funding, especially in sectors deemed critical to national and economic security.
• Beyond government support, companies receiving public backing are also attracting significant private investment. This was demonstrated on Tuesday, when it was reported that Intel, which had already secured a $2 billion investment from SoftBank, is now in talks with Apple for another cash injection. These discussions are part of Intel’s broader strategy to sell its chips to the iPhone maker, as Apple faces growing pressure to reshore much of its manufacturing capacity to the United States.
• The evolving relationship between the government and the private sector points toward greater integration. A probable consequence is a competitive advantage for firms with close government affiliations, which may receive preferential treatment in the form of directed contracts. The long-term risk of this arrangement, however, is a potential decline in operational efficiency for these favored companies, as market discipline may be weakened by guaranteed government support.

New Tariffs: The White House has launched an investigation into imports of robotics, industrial machinery, and medical devices under Section 232 of the Trade Expansion Act. The process, which began on September 2, authorizes the president to impose tariffs on goods deemed critical to national security. While potential tariffs on these specific goods have not been discussed, the president has routinely shown a willingness to use this authority (typically imposing tariffs 50% or higher for specific products) to protect strategically important industries.

Weak Lending Standards: Debt investors are concerned about increasingly lax credit standards following the recent failures of two seemingly healthy companies. This apprehension stems from the collapse of subprime lender Tricolor and car parts supplier First Brands Group filing for bankruptcy, both of which had access to favorable financing before their respective downfalls. While this issue is not expected to trigger a financial crisis, it is raising questions about the financial health and stability of other companies in the market.

Argentine Bailout: The US government has moved to support Argentina and prevent a collapse of its currency. Treasury Secretary Scott Bessent has signaled a willingness to purchase Argentine dollar-denominated bonds and could offer standby credit via the Exchange Stabilization Fund. This action underscores the US dollar’s enduring influence globally, even as its reserve currency status faces challenges. While we maintain a bearish outlook on the dollar, we expect its decline to be volatile.

Gaza Peace Plan: The White House has reportedly presented a 21-point plan to Arab and Muslim leaders aimed at ending the war in Gaza and establishing a post-Hamas government. This diplomatic push comes as the US seeks an urgent resolution to the conflict to focus on other pressing global issues. During the discussions, the US reportedly reassured leaders that it would not permit Israel to annex the West Bank. A peaceful resolution to the Middle East conflict would expectedly help stabilize global oil markets

Energy Policy: A survey from the Federal Reserve Bank of Dallas reveals significant concern within the oil industry that current US government policies are negatively impacting profitability. Industry participants cite the administration’s dual pressures of advocating for lower energy prices while supporting tariffs on essential equipment as major factors compressing margins. This weak sentiment suggests that certain sectors may take longer than expected to adapt to the new policy environment.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with some observations regarding the latest surge in global gold prices. We next review several other international and US developments with the potential to affect the financial markets today, including a potential new wealth tax in France, big anti-corruption protests in the Philippines, and the White House’s new $100,000 application fee for H-1B worker visas.

Global Gold Market: Near gold futures prices as of this writing have jumped approximately 1.4% to a new record high above $3,760 per ounce, apparently reflecting investors’ increasing confidence that the Federal Reserve will cut US interest rates aggressively over the coming year. On that note, traders are looking ahead to scheduled comments later today by Stephen Miran, essentially the White House’s new representative on the Fed’s policymaking committee. Miran will likely continue to press the argument for aggressive rate cuts.

• Other developments are probably also helping to convince investors that deeper rate cuts are coming and will continue to boost gold prices. For example, the Fed’s preferred gauge of inflation, the PCE price deflator, will be updated for August at the end of the week. If it shows well-behaved inflation, the Fed will be more likely to keep cutting rates.
• In addition, it appears that global central banks are continuing to buy gold aggressively to diversify their portfolios away from the dollar.
• Geopolitical tensions, central bank buying, and falling real interest rates have historically been associated with strong gold prices. As just one example of our continued positive outlook on gold, we currently maintain meaningful exposure to the yellow metal in all of Confluence’s Asset Allocation strategies and in our Global Hard Assets portfolio.

US Industrial Policy: Reports late Friday said the White House intervened last week to prevent US Steel from shutting down a major facility in Granite City, Illinois, invoking the controversial “golden share” granted to the federal government to allow Japan’s Nippon Steel to buy the firm. The move will likely fuel further concern about rising government intrusion into private-sector business decisions.

• If those concerns worsen too much, high-profile firms at risk of intervention could see their stock values decline.
• More broadly, such activist policy by the government could further undermine global investors’ view of the US investment environment, pushing down the value of the dollar and giving a further boost to foreign stock values.

US Immigration Policy: President Trump on Friday signed an order imposing a $100,000 fee when firms apply for H-1B visas, which are widely used to bring technology workers from China and India to work in the US. Administration officials argued the fee would ensure that firms only bring in exceptionally skilled workers, creating more opportunities for US graduates and raising their pay.

• For US companies in the technology sector and beyond, a key risk is that the pool of competent US workers may not expand quickly enough to replace the foreign workers, leaving them with insufficient tech talent to innovate, grow, and keep boosting the value of their stock.
• So far today, the new policy is also weighing on Indian technology service providers, which provide many of the Indian workers who arrive in the US on H-1B visas. For example, Infosys, Wipro, and Tata Consultancy Services have all seen their stock price fall by at least 2.2% so far today.

France: With political polarization continuing to complicate the effort to cut the government’s gaping budget deficit, the center-left Socialist Party is pressing for an annual 2% wealth tax on anyone with a fortune greater than 100 million EUR ($118 million). Importantly, the Socialists are crucial to the survival of Prime Minister Lecornu’s government. If they can use that position to get the proposal passed, it would undermine President Macron’s effort to make France more business friendly and would likely weigh on French equities.

Israel: After the United Kingdom, Portugal, Canada, and Australia recognized Palestine as a state over the weekend, right-wing members of Prime Minister Netanyahu’s government have responded by demanding that Israel immediately annex the West Bank, which Israel has occupied since the 1967 war. Netanyahu is reportedly mulling a range of options, including partial annexation, and may announce his decision in the coming days. Any move to annex even a part of the territory would likely further isolate Israel, weighing on its economy and markets.

Russia-Estonia: Reports late Friday said three Russian MiG-31 fighter jets flew over Estonian territory for 12 minutes before being chased away by Italian F-35 fighters operating in NATO’s “Baltic Sentry” program. The incident marks the third incursion of Russia aerial assets into NATO territory in the last week. That suggests Russia has taken a page from China’s strategy in the Asia-Pacific region, where it gradually increases its “grey zone” activity in territory it covets in order to normalize its presence and potentially mask future aggression.

Philippines: Continuing a recent trend, tens of thousands of protesters marched in locations around the country yesterday to decry public corruption, prompting the government to put the armed forces on alert. The protests stem from news that officials and their cronies siphoned some $2 billion from fake flood-control projects in a province north of Manila. The protests are now morphing into a broader movement against public corruption, which could potentially topple the Marcos government, spark political instability, and weigh on Philippine asset values.

Argentina: The central bank bought more than $1 billion of pesos Wednesday through Friday to keep the currency’s value from falling below the band set by President Milei in April. In addition, Economy Minister Caputo vowed the government would “sell to the very last dollar” to keep the peso within its band. The currency has plunged some 9% over the last two weeks after Milei’s party unexpectedly lost local elections in a landslide, suggesting his libertarian policies may not have staying power. Argentine stock prices have fallen some 30% since early August.

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