We may have had a lull for the US Thanksgiving holiday, however, the turkey dinner was barely digested and Black Friday bargains had yet to be delivered, before world events took a surprising turn.
It had looked as though things in the Middle East were calming down.
Israel had agreed a ceasefire with Hezbollah to end the fighting along the southern Lebanese/Northern Israeli border.
When all of a sudden rebel forces in Northern Syria united to launch an offensive against government troops, and the regime of Bashar al Assad, in Damascus.
The rebel forces advanced quickly to capture the Assad regime stronghold of Aleppo (the country's second city) catching western observers and Syrian government forces unawares.
Syria of course has been in a state of civil war since 2011, though the conflict there had ground to a stalemate over the last two years.
However the hornets nest of rival factions appears to have been stirred up once more.
Regime change in Syria might be no bad thing, if it could be achieved quickly.
However those in power are unlikely to go quietly, and will look to their allies, which include Russia and Iran, for support. And that is where it gets complicated and concerning in equal measure.
Syria sits between Turkey to the north, Iraq to the west and Lebanon to the east, with Israel and Jordan to the south.
Russia, a supporter of Bashar al Assad, maintains a military presence in the country that includes aircraft, naval vessels and ground troops.
Source: BBC.co.uk
Meanwhile reports surfaced that Iranian backed militias have entered Syria from Iraq to bolster the Assad regime.
In a call to Iraq’s prime minister, Mohammed Shia al-Sudani, Iranian president Masoud Pezeshkian, was quoted as saying:
“As the region was moving towards relative calm following the ceasefire in Lebanon and attention was turning to Gaza, the recent events in Syria caused serious concerns about regional security.”
Turkey tacitly supports some of the rebel groups fighting the Assad forces, so the civil war that was in the doldrums now has the potential to spiral into a full blown cross border conflict.
Though of course that would be the worst case scenario.
This is the kind of unpredictability that explains why the markets don’t like politics, or at least the uncertainty involved in politics and why they try to avoid that as much as they can.
Markets prefer certainty and quantifiable outcomes
Of course markets are quite happy to get behind a known and quantifiable political outcome, as we saw in the aftermath of the US Presidential election.
The S&P 500 rallied by +3.42% in November and as we can see in the table below, several sectors made far larger gains in the last month.Consumer Discretionary and Financial stocks being the most prominent of these.
Source: Barchart.com
Plenty of issues in Europe too
We don't have to look as far afield as Syria for political instability, however.
President elect Trump has been shaking the geopolitical tree with comments and posts about trade tariffs.
The most recent of which suggested that BRICs countries could face a 100% tariff on exports to the US, if they continue with plans to create a mutual currency to facilitate non US$ trade.
Two of Europe's largest economies are also embroiled in a period of political turmoil.
France faces the prospect of having no effective government for the next 12 months after Premier Michel Barnier, forced through social security spending plans, without the approval of parliament. Causing parties on both the left and right of the political spectrum to call for a vote of no confidence in the government this week.
Mr Barnier has found it impossible to meet the demands of the opposing parties in the French parliament. None of which has a big enough majority to rule independently.
Mr Barnier, a former EU negotiator was the compromise candidate for prime minister, however there has been little good will towards his premiership ,which could soon be over.
In Germany the situation isn't much better. The coalition led by Chancellor Olaf Schultz recently fell apart and campaigning has officially started for the snap general election that will be held in 2025.
As in France the electorate looks polarised between the left and right of the political spectrum with the once fertile centre ground now looking increasingly barren.
Chancellor Schultz's SPD are polling third, behind the more moderate CDU and Right wing AfD parties,
Once again it seems unlikely that any one party will gain an outright majority which in turn could mean a protracted period of horse trading, post election, as parties vie to form a viable and sustainable coalition government.
Of course if that was possible, we would not be in this situation in the first place.
All of this comes as the European Union is trying to reintroduce some sense of fiscal discipline back into the Eurozone and to form and coordinate a response to the likelihood of trade tariffs under the Trump administration.
Source: Trading Economics
The Euro has fallen by more than 3.25% in the last month whilst the spread between German and French 10-year bond yields has widened significantly in that time.
Source: Trading Economics
For the moment wider markets are happy to ignore the turmoil as much as they can.
For example, if the fighting in Syria remains confined to Syria and particularly if the speed of the rebel advance is curtailed then that can be pushed to one side, as can the political issues in Germany and France.
Because after all Belgium did not have a functioning government for a period of almost two years, and the country did not collapse.
Of course there are many variables at play in all of the above, added to which we have the wildcard of the Trump administration which formally takes office on January 20th. So this could actually be the calm before the storm.
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