CIO Insights: Venezuela Developments and Market Implications

Erin Orekhov (00:00): Good morning, Eric. Thank you for joining us. In light of the events that happened over the weekend with Venezuela, I wanted to get your take on how clients should be thinking about the impact on their investment portfolios and how we're during this time. 

Eric Stein (00:14): Thank you, Erin. Excited to be here. I think there are two main points to focus on. The first is geopolitics. This is a big deal what the Trump administration has done and reinforcing its strategy of dominance over the region in ways that are certainly not traditionally done via the capture of Maduro. And so if you think of the doctrine, almost like the Monroe Doctrine, the Trump Doctrine is certainly regionally focused, which I think not only has ramifications for other parts of the Western hemisphere, but we've seen things with Russia and Ukraine, potential actions with what China's thinking about or could potentially even do with Taiwan. So think there's a broader geopolitical impact and ramifications from this is the first thing to focus on. And then the second is you get more specific into markets. Oil services companies are up this morning, particularly Chevron. That's been the one U.S. company that has stayed invested in that area. But I think all the majors are going to now try to invest into Venezuela, a country with tremendous oil reserves and resources, but a country where over the past couple of decades, the energy infrastructure has really gotten run to the ground. And so there needs to be a lot of capital investment there. Also from a market perspective, Venezuelan sovereign bonds are up seven to eight points, which is huge from a percentage perspective because they now trade in the high 30s. So that's been been large. No discernible moves in rates of the U.S. dollar. Oil prices are something to watch from an administration perspective. Inflation was a big issue in the 2024 election. Inflation has been something big on voters minds in 2025. And here as we turn the page into 2026, the one saving grace for inflation that's keeping it lower, as there have been forces to keep it higher, has been lower oil prices. Even though oil is up about a dollar today, this should lead to more supply from an oil perspective, which would be good at capping out prices. 

Erin Orekhov (02:14): And in terms of any trades within portfolios, of course we run a variety of fixed income and equity and multi-asset mandates, but are the trades already done as of this morning, Monday, January 5th, or is there still opportunity to make positioning changes in portfolios? 

Eric Stein (02:29): Yeah, look, think all of our portfolio managers, they don't just react to short term news. They're trying to take a longer term perspective. But could there be opportunities in some of the oil names across the equity space? Yes. And then in the sovereign markets, that market has been quite active this morning with a lot of flows going on two way back and forth, even with those bonds up seven or eight points today. 

Erin Orekhov (02:52): In terms of the oil supply and possibly leading to lower oil prices over time, what kind of timeline are you thinking that would play out over? 

Eric Stein (03:01): I don't even know if it's going to lead to lower prices per se, but lower than the counterfactual. And so it gives the U.S. more power in that if there's more supply from Venezuela, and let's say there's a disruption coming from the Middle East or coming from Russia into the global markets, it adds another buffer there potentially. 

Erin Orekhov (03:21): Thank you Eric so much for sharing those insights. 

Eric Stein (03:23): Thanks for having me. It's a fluid situation, so we'll be watching it.