Must Read Research: Oil, the Consumer, Rates and Elections

PodcastGlobal Research Unlocked—Oct 13

Brazil-focused funds saw their largest inflows in a decade after the first-round presidential election, as investors weighed policy and reform prospects. US spending excluding gasoline grew 5.1% year over year in September, while rate strategists warned that markets may be underpricing the risk of another Fed hike. Senior oil analyst Jean Ann Salisbury sees prices near $100 a barrel as a reflection of geopolitical and supply-chain risks rather than a shortage of crude.

Emerging Markets Consumer Spending Interest Rates Oil Geopolitical Risk Supply Chains

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Key Takeaways

Brazil’s first-round election coincided with the largest inflows in a decade to Brazil-focused funds, as investors reassessed policy and reform prospects; separately, Jean Ann Salisbury said geopolitical risk—not a shortage of crude barrels—helps explain oil near $100 a barrel. The bullets show distinct ways political developments can matter to markets: through regional fund flows in Brazil and a risk premium in oil.

Bank of America data showed U.S. spending excluding gasoline rose 5.1% year over year in September, while rate strategists warned that strong economic data and elevated nominal growth could lead the Fed to tighten further despite markets pricing only a 25% chance of another hike. The fixed-income teams favor quality and floating-rate exposure and caution on duration.

GEO-POLITICS

Brazil Election — After Brazil’s first-round presidential election, Brazil-focused funds recorded their largest inflows in a decade as investors reassessed economic policy and reform prospects. Brazil’s large weighting in Latin American traded funds makes the election outcome important for regional flows. Historically, market-friendly policy shifts can drive meaningful valuation changes.

“Following the first round of presidential elections, Brazil focused funds attracted their largest inflows in a decade as investors reassessed the outlook for economic policy and reform…”—

ECONOMY

Consumer Spending — Bank of America credit card data showed US spending excluding gasoline rose 5.1% year over year in September, its third-strongest rate in four years. Strength across goods, services, discretionary spending, and necessities points to consumer resilience in the data cited.

“Bank of America credit card data continues to point to a resilient US consumer. In fact, September spending excluding gasoline grew 5.1% year-over-year…”—

MARKETS

Oil Risk Premium — Senior oil analyst Jean Ann Salisbury thinks oil near $100 a barrel reflects risk, not a shortage of crude. Crude exports have nearly recovered to just below the prewar pace, but longer shipping routes, depleted strategic reserves, and refined-product shortages continue to support prices. Russian refinery disruptions add strain, and energy markets remain highly sensitive to geopolitical risk.

“In other words, if Middle East crude exports are nearly back to normal, why is oil still trading around $100 a barrel?…”—

Oil Prices And Geopolitical Risk

Jean Ann Salisbury says oil near $100 reflects shipping disruptions, depleted reserves, product shortages and geopolitical uncertainty more than a crude supply shortfall.

US Consumer Spending Resilience

September spending excluding gasoline rose 5.1% year-over-year, while store visits showed consumers remain healthy but selective and retailers face persistent cost pressures.

Fed Risks And Brazil Election Flows

Rate strategists see markets underpricing the chance of another Fed hike and favor quality and floating-rate exposure, while Brazil’s election has helped drive a decade-high inflow into focused funds.