Were the optics of the Trump-Putin peace summit rather startling? A red carpet was laid out for President Putin in US territory. No questions were taken post the press conference. No sanctions have been announced. Has this meeting legitimized Putin’s re-entry into the Western world? Has the US ended up giving way too much to Putin?
Peter McGuire: Well, I do not think they gave too much. There was the Russian leader there and that needed to be displayed from an etiquette standpoint and he was welcomed onto American soil. It is pretty hard to argue with his case. The reality of the matter is that it is probably going to be very much a work in progress. I do not think we are going to see a lot of volatility coming from it.
At the first stage, President Putin said he is looking for another meeting possibly in Russia in Moscow and we are looking at timelines and then President Trump saying that he will be phoning President Zelenskyy and that should have happened by now or certainly in the next matter of hours. It will be interesting to see whether he has prepared to move forward and certainly his European counterparts’ reaction. So, it is very much a work in progress and I do not think we get a deal like this done in an afternoon. I am expecting it to drag out for a while and we will have to wait and see whether something concrete is going to be achieved and the brinkmanship from both leaders and naturally European counterparts and President Zelenskyy.
How do you expect investors to move their monies? How do you expect the markets to react upon this news? Do you anticipate more volatility in the coming few days?
Peter McGuire: Well, first off, we are in for a very big week as far as the Fed’s Jackson Hole meeting is concerned. We cannot discount that at all. The US dollar has come under a little bit further pressure on the downside in the sense that a deal was not done. Gold could have a little bit of movement to the upside. Equities were very flat. When you are thinking of what happened on Friday’s close in New York. Asia inhaled this on Monday morning and it could start off as relatively flat. I am not expecting anything dramatic to really push the market around because nothing dramatically has come out of this as yet.
If a deal was done and all of a sudden, there was a change in the whole footprint as far as the Ukraine situation and Russia is concerned, which I do not think anyone really expected to happen; but if that happened, that would have changed the landscape but that has not happened, so I am thinking of a slowish start across Asia on Monday and I am keeping a very close eye naturally on US dollar and Fed talks this week.
One very important quote that President Putin said in that joint press conference is that today’s agreements will help us restart pragmatic relations. When he states pragmatic relations between Russia and the United States, is he hinting at a possible economic cooperation and collaboration between Russia and the United States?
Peter McGuire: We have got to look at it from many lenses. If we look at it first off and appreciate it from an energy perspective, let us look at OPEC plus and let us look at the US. The US is the largest oil producer in the world, Saudi and then Russia. So, they are the elephants in the room. So, there is no doubt that President Trump’s wanting to see from a cost perspective, cheaper energy prices for the US consumers and this will wash across as we are seeing as far as energy prices are concerned. We have seen WTI approaching that $60 handle. Brent is now at the mid-$60s and that seems to be a downdraft that is very much embedded over this Q3 time frame where we all say that there is going to be a glut as far as oil come the early part of Q4 and that is going to help drive down inflation and be very good from a consumption standpoint, more money in the wallet and the purse of the consumer so that seems to be the first part of it and I am sure that they are in some ways working together to achieve that. As far as production is concerned, we all understand the situation with secondary tariffs and China and India buying Russian crude. Only a few years ago, Russian crude amounted to 2-3%. Now, India is buying about 35-36%. So, it is a dramatic increase. The jury is still out on how to strike a deal or the art of deal making, throw something in there that creates turbulence which it certainly did from a secondary standpoint as far as any form of secondary tariffs or impact to the Indian consumer. So, it’s early days yet and they are going to work together and this is a work in progress. How all these frames have to be seen and the next couple of weeks are going to be very fascinating.