The Thucydides cap on the China equity rebound trade

People ask me about geopolitics a lot.

And I guess I understand why.

There's a lot of people out there that write about geopolitics all the time.

And I want to start, in case you were one of the people that read it, I want to start with the Eurasia Group, which is one of the political consultancies out there.

In 2017, their publication was called Geopolitical Recession, and they had this preposterous opening salvo at the beginning of it.

This year marks the most volatile political risk environment in the post-war period.

at least as important to global markets as the economic recession of 2008.

Now, something tells me that the Eurasia Group considers every year the most volatile political risk environment in the post-war period.

But in any case, it was absolutely absurd to compare 2017 to the 2008 recession, which was the worst global economic downturn since the Great Depression.

And if you're keeping track, global equity markets are up around 150% since January 2017.

So if those are the geopolitical risk materials that you're reading, you should probably read something else.

In any case, geopolitical risk indicators are usually not that helpful for investors.

We track a bunch of different variables to see which indicators over time are most helpful for figuring out market returns.

And what we do is we figure out how much money would you make if you only invested when this signal was strong and you didn't own the market when the signal was weak.

And as we show in the table that's included in the eye on the market, the most...

Beneficial variables to follow are things having to do with payroll growth, industrial production.

Remember, the S&P is more of a production index than a consumption index because the S&P is very different than GDP.

Leading indicators, financial conditions, business confidence, these are the variables that over time have the greatest and strongest investment signal benefits for investors.

There's a geopolitical risk index that we also look at.

The sign's actually negative, which means that investors would have lost money by following it for investment purposes.

So most of the time, geopolitical risks are not super important for investors.

And this rhymes with other research we've done showing that other than the Arab-Israeli War of 1973, most geopolitical events are kind of gone from the market six months later.

And 73 was the exception due to the OPEC oil embargo and Nixon's wage and price controls.