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Mark Twain is credited with popularizing the gentle put-down about classical music in general, and music by Richard Wagner in particular, by saying that such compositions were "better than they sound!" With the "sturm und drang" over the horrific slaying of Saudi journalist Jamal Khashoggi (likely to leave U.S.-Saudi strategic relations unaffected, but Congress may have the final say) and yet more revelations of Russian influence operations (finally awakening the U.S. "sleeping giant"), one might conclude that significant, market-shifting geo-political events are underway.

  • There are some looming for sure.  The most worrisome is China's all-of-government global strategy and the confrontational U.S. approach to counter -- highlighted by U.S. tariffs and reinforced by Vice President Mike Pence on October 4th; second is Iran's nuclear program, contained by the Obama-era JCPOA but which President Trump jettisoned in May; Iran will become a front-and-center security issue again when Tehran feels the full effect of U.S. oil sanctions as they are re-imposed.   
  • But these are "gathering" issues; they are not immediate threats that can roil markets before 2019.

The remarkable feature of the international scene now is that it actually IS "better than it sounds!" With no attempt to undercut Mark Twain's humor, consider that the punditry nine months ago was worried about two existential concerns that really could have dramatically moved markets:  NAFTA and North Korea.

  • On NAFTA, a strong push by Governors whose states would be deeply affected by a U.S. NAFTA withdrawal, as well as by a business community not willing to see disruptions in carefully nurtured supply chains, kept NAFTA (now "USMCA") a three-way deal. That outcome was by no means preordained: nine months ago, the worries were intense about the president's move to walk away; had he acted on impulse, markets would have dramatically signaled displeasure.
  • And on North Korea, one quickly forgets the intensity of the Trump-Kim Jong Un rhetoric shortly after the first of the year; and almost completely forgotten was the frightening January 13, 2018 announcement: “Ballistic missile threat inbound; seek immediate shelter; this is not a drill!”  This was of course the mistaken “alert” in Hawaii; the Pentagon quickly corrected the mistake. 
    • But it wasn’t hard nine months ago to imagine a similar “mistake” in Pyongyang – an event made less likely now in light of ongoing head-of-state and foreign ministry discourse. (Trump will not get North Korea to de-nuclearize, but that’s a separate story.)    

So, despite the "gathering" geo-strategic issues above (China and Iran in particular), one can breathe slightly easier as we ease through the last quarter of 2018. With apologies to Mark Twain, at least in comparison to the start of this frustrating international year, the global scene IS better than it sounds. 

  • But with no off-ramps in sight to defuse both the Iran and China dilemmas, it may not last that long.  Enjoy the interlude.