Wealth Outlook 2024 - Slow then grow

29 Wealth Outlook 2024 | Our outlook Geopolitics and elections: assessing risk in 2024 Political risks and portfolio adaptations The war in Ukraine has displaced or shifted the volume of commodity exports at a scope last seen in 1974 and the Iran/Iraq war beginning in 1980. We consider the economic repercussions of the war in Ukraine and the interaction with politics in the US and Europe as among the greatest of today’s global risks. The Hamas attack on Israel, while not driving a significant regional conflict immediately, still has the potential to cause similar global disruption. Russia has redirected its petroleum exports from the West to other markets. However, food commodities and other energy services remain significantly impaired. These shortages could potentially intensify in the year or two ahead. And with a significant oil market share gain for Iran – which has increased its crude output by 55% since 2020 – the share of geopolitically vulnerable energy supplies the world relies on has increased. This points to higher energy prices through a security risk premium. It also points to investments in Western energy supplies – from conventional fossil fuels to alternatives – as a potential portfolio hedge (see No. 3 in Our top 10 high conviction potential opportunities on page 54 and OPEC's unlikely role in the energy transition on page 86 ) . With that said, none of the geopolitical disputes – including the friction between the US and China over technology (see The implications of G2 polarization on global technology on page 98 ) – has resulted in a catastrophic loss of global trade. Because inventories of consumer goods bulged higher in late 2022, trade declines in 2023 have helped work down inventories of consumer goods that intrinsically posed a significant recession risk ( FIGURE 3 ). And now, as discussed in our Slow then grow on page 10 , even those trade shocks across the world’s industrial supply chains are broadly abating. Among other risks, we believe cybersecurity threats are escalating and collectively may rise to the level of a global shock. With cyber defense being the top priority of corporate chief technology officers, we maintain a thematic overweight in cybersecurity shares in core portfolios. (See No. 2 in Our top 10 high conviction potential opportunities on page 54 ) . FIGURE 3 Year-over-year (YoY) US change in world exports YoY% change Recession Global trade 50 0 ˛50 2000 2005 2010 2015 2020 Source: Haver Analytics through November 24, 2023.