(Note, this post was updated on Sunday, January 22, 2023 to reflect the change in Turkey's election date.)

Good morning. Here are the updated risk metrics for Tuesday, January 10, 2023. Sorry it's a little late today.

☕️ Coffee alert - today’s email is a bit of a monster so I'd suggest you freshen up your cup before you dive in.

Oil dropped as did uncertainty around US markets as the gyrations from December and the first few days of January recede. Greater market certainty is likely to come following Fed Chair Jerome Powell’s speech at the RiskBank Symposium today although the news itself may remain grim for many, especially as some Fed officials are saying that rates need to exceed 5%.

Supporters of former President Bolsonaro stormed Brazil’s Congress on Sunday, claiming that President da Silva’s election was illegitimate, copying much of the playbook used by Trump supporters on January 6, 2021. In a year with some very significant elections (covered below), the normalization of election violence is an unwelcome turn. Expect to see greater tension in the run-up to most elections, particularly as politicians across the spectrum cast doubt on the legitimacy of the results.

Two quick reminders:

🗓 This email is going daily! Look out for the newly rebranded Daily SITREPs* starting on Monday, January 16th!

*I struggled to come up with a better name than situation reports so I opted for the old military favorite, hence SITREPs. (If you recently retired and hoped never to have to start your day this way, I’m sorry and will try to make it worthwhile.)

🎁 Referral rewards start today. Use your personalized code at the bottom of the email to share these reports with others The more sign-ups, the more stuff you get. I’d be enormously grateful if you'd share this with your professional network, particularly via LinkedIn.

Now, on with the show.

(Not sure of how to use these metrics in your risk analysis? Read the user’s guide here.)

Relative Values (90-Days)

Turn your phone for a better view ⟳

Trends (21-days)

Turn your phone for a better view ⟳

Commentary and Evaluation

Brent Crude

Brent Crude is very low for this 90-day interval. Prices decreased moderately over the last 21 days after moderate fluctuation.

What to Watch

(No change) Market commentary and analysis vary wildly about what oil will do in 2023. However, taking out the wildest spikes brings us back to the analysis I shared earlier in the week that ‘prices will peak around $95 with an average of around $90, a drop from previous 2023 estimates which reflects a gloomy outlook for the year’.

See Reuters for more

However, within that range, the opportunity for significant movements remains. Russia’s progress - or lack thereof - in Ukraine and any additional US or EU sanctions may lead to additional manipulation of the oil price. Meanwhile, China’s plans for a great economic boom are delayed but not abandoned so demand there will increase at some time this year as they bring COVID under control. Both situations need to be watched as should Iran which may seek to raise regional tensions as internal dissent continues. This is more of an outlier but worth tracking nonetheless.

Iron and Steel

Iron and Steel remain very high for this 90-day interval. Prices increased moderately over the last 21 days after moderate fluctuation.

What to Watch

(No change) The Chinese construction and manufacturing boom that many expected in 2023 is off to a very unsteady start as COVID spreads rapidly after December’s relaxations. Sectors that had struggled under the strict COVID restrictions are suffering just as much in the current laissez-faire environment. This will delay the expected economic boom into mid- to late-2023 and it seems that the Chinese economy will continue to suffer through Q1 and into Q2, postponing with associated pressure on steel, iron, oil and shipping.

See the Financial Times for more.

Market Volatility (VIX-US)

Market Volatility (VIX) is very low for this 90-day interval. The index decreased moderately over the last 21 days after significant fluctuation at the end of 2022.

What to Watch

The range of conditions facing markets and investors remains significant and complex meaning that it’s unclear what will help ease tensions and reduce volatility. Greater market certainty is likely to come following Fed Chair Jerome Powell’s speech at the RiskBank Symposium today although the news itself may remain grim for many, especially as some Fed officials are saying that rates need to exceed 5%.

The pace of announcements from large firms conducting layoffs and how retailers - like Bed Bath and Beyond - fair over the next few months should give a sense of how things are moving and indicate when things have stabilized.

The wildcard is the US House of Representatives where the GOP’s difficulties in electing a speaker prove the willingness of a very small minority to block routine Congressional business. This suggests a lot of turbulence ahead.

Wheat

Wheat remains low for this 90-day interval. Prices ended relatively flat over the last 21 days after moderate fluctuation.

What to Watch

(No change) Despite agreements brokered by Turkey, Russia could still impose a complete blockade on Ukrainian grain exports to exert pressure on Kiev and her allies. Meanwhile, even strict controls and inspections for outbound shipments mean that exports remain slowed. Moscow could also conduct military operations to disrupt spring planting meaning that prices could rise again next spring and summer.

Read more in AGWeek.

Ocean Freight (FBX)

Ocean Freight (FBX) remains very low for this 90-day interval. Prices ended relatively flat over the last 21 days despite a sharp spike in late December.

What to watch

(No change) China’s reopening and the effects of recessions on demand in the US and elsewhere remain the biggest issues to track but there are no definitive signs to watch at the moment.

Up-to-date shipping data supplied by our partner Freightos

What I'm Watching in 2023

I have a substantial list of things I’m tracking in 2023. I’ve tried to identify the events or metrics that are likely to have the biggest, broadest impact. I’ll be sharing these over the next few weeks but, to kick things off, with the fresh images of Bolsonaro supporters being tear-gassed in Brasilia, here’s a run-down of some key elections I’ll be keeping an eye on.

I've included my own summary notes of what's important and why I want to track this election, but I need to stress that I'm not an expert on the politics of any of the countries listed below. As always, you should do your own in-depth research if you are exposed to any of these geographies.

Note - If something’s not on this list, it doesn't mean that it’s not important, but rather that the election might not change things too much. Meanwhile, some are noted below because they appear important but are unlikely to lead to much change.

Elections I'm Watching in 2023

A full list of elections for 2023 is at the bottom of this piece along with dates where available.

🇫🇮 Finland

A strong showing by the opposition parties in the 2022 midterms may mean a change in the composition of Finland's government. Internationally, stances seem to be similar to the current ruling party, but changes to domestic policy are likely. Support for joining NATO seems likely to remain strong.

🇱🇾 Libya

Libya's main factions have agreed to the terms of national elections during talks brokered by Egypt and supported by the UAE, US, and other influential players. This paves the way for parliamentary elections in 2023, but it is unclear if factions, all of whom remain armed, will peacefully accept the results. Stability in Libya would bring additional oil into global markets and significantly reduce the flow of refugees into Europe's southern borders, particularly Italy. However, the country's southern borders along the Sahel would remain lawless and open to smuggling and human trafficking, mainly limiting security improvements to the northern coastal areas.

Continued unrest, disputes over election rules, and vying for influence before the votes may delay the election. The three leading contenders are the current Prime Minister Abdul Hamid Ddeibeh, whose influence remains centered around Tripoli in the west, General Hiftar, who controls the majority of the east around Benghazi, and Saif al-Gaddafi, son of former president Muammar al-Gaddafi.

Read more in AL-Monitor

🇳🇬 Nigeria

Term limits prevent current president Buhari from continuing to rule Nigeria. Several strong candidates are standing to take his place at a time when growth is slow, the Naira is weak and inflation places significant strain on Nigerians. Corruption remains a primary concern, particularly as two of the leading candidates stand accused of graft.

Meanwhile, the country still suffers significant security challenges from criminal gangs, kidnappings, and unrest in the Niger Delta. Large parts of the north remain dominated by Boko Haram and the Islamic State of West African Province, who move freely between Nigeria and Chad.

Given the range and severity of these challenges, whoever wins the election is unlikely to be able to make significant changes in the short term. Nevertheless, the youthful population (over 50% of Nigerians are under 20) and dynamism of Nigeria suggests that the country will thrive.

Read more in The Africa Report

🇵🇰 Pakistan

Many in Pakistan blame Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar for the country's economic difficulties, and new leadership may have an opportunity to make some significant structural changes to relieve some of the country's economic pressures. However, with low foreign reserves and the widespread damage and economic consequences of the extensive flooding in 2022, there's no quick fix, no matter who takes over.

The country's relationship with Afghanistan's Taliban appears to have fizzled out now that the Taliban have taken over in Kabul, meaning that Islamabad will have little influence over what happens to its north which could increase security and humanitarian pressures.

Read more in The Economist

🇵🇱 Poland

The government in Warsaw is a shaky coalition of parties, regularly subjected to no-confidence votes and under pressure from the EU to accelerate reforms that were part of the agreement to admit Poland to the union. The elections are due in the Fall of 2023, but this instability within the coalition may mean that these have to be brought forward if the coalition dissolves before then.

However, although the country's anti-democratic streak and moves to authoritarianism in some areas concern Brussels, Poland has been a strong supporter of Ukraine in the war with Russia and has pushed the EU to provide additional support, including heavy weapons. This presumably puts Brussels in a difficult position of trying to pressure Warsaw to enact reforms and strengthen democracy, without muting Poland's vocal support of military aid for Ukraine. This offers a greater opportunity for the harder-line parties in the upcoming elections, as it is unlikely that the EU would want to show any division in its stance towards Russia.

🇹🇳 Tunisia

Tunisia's late 2022 election turnout was meager, with only 11% of eligible voters turning out, leading to a scheduled run-off in February 2023. As the seat of the Arab Spring, the country's initial moves towards democracy and free elections were heralded as a new constitution was written and a widely representative parliament elected. However, recent changes by President Saied have weakened these institutions and the opposition, eroding voter enthusiasm.

Opposition parties and trade unions are calling for a postponement of the election until reforms are put in place, while President Saied has said that no changes should be implemented until the second round of voting is complete.

Whatever happens in February, Tunisia seems likely to be looking at an extended period of uncertainty and stagnation while the political situation is resolved, but it is unclear what would motivate the President to make meaningful change.

Read more in Al Jazeera

🇹🇷 Turkey

Note - President Erdogan announced in mid-January that elections would be brought forward to May 15, not June 18.

Signs are that President Recep Tayyip Erdogan's 20-year rule of Turkey is likely to end with this year's elections. The country's economy has been battered by his poor decision-making and wishful thinking concerning anti-inflationary measures. There also seems to be a desire to return to a more secular regime after Erdogan's implementation of stricter Islamic codes during his presidency.

Erdogan's departure would signify a significant change for Turkey, the EU, and other regional relationships as the Turkish leader has been constantly at odds with NATO partners and remains close with Vladimir Putin. Many of his changes - e.g., the 'seeding' of Turkey's institutions with his supporters - will take years to reverse. However, there may still be some rapid changes if a new president is elected, particularly if the former mayor of Istanbul, Ekrem Imamoglu, wins. However, some issues, such as Ankara's stance towards the Kurds / Kurdistan and possible rapprochement with Syria, may remain the same, irrespective of who wins this election.

Nevertheless, support for Erdogan remains strong in many areas, and large parts of the government may remain loyal to him, meaning that a close election may become contentious or see him unwilling to concede, leading to unrest.

Read more in The Washington Post

🇺🇦 Ukraine

Ukraine's parliamentary elections must be held by 29 October 2023. It is unlikely that the war with Russia will be over by then, meaning that parts of the country will remain disrupted, occupied, or in conflict. That would lead to an imbalance towards the western regions untouched by the conflict and the possibility of greater Russian interference anywhere under / adjacent to its areas of control.

These conditions may lead to some postponement of the elections into 2024 when the next Presidential elections are scheduled.

Any changes to the parliament's composition are unlikely to change the country's commitment to fighting Russia.

(Read more on in-depth commentary on some of these key elections on Foreign Policy and scroll to the very bottom for a full list of elections scheduled for 2023.)

Random Stat

2 hours, 35,000’, zero launches, 25% drop

After a two-hour mission last night, Virgin Galactic’s attempt to launch a satellite from a UK launch ended in failure as the rocket failed to escape the atmosphere. The rocket was ferried up to around 35,000’ by Cosmic Girl, a modified Boeing 747, before being launched from underneath the aircraft’s wing. The rocket failed to reach orbit and burned up over the Atlantic, destroying the rocket and its satellite payload. The failure sets back the UK’s attempts to join the list of countries able to successfully launch space missions and Virgin Galactic’s share prices reportedly dropped 25% in after-hours trading, following the unsuccessful mission.

(However, as SpaceX has shown, there can be a lot of costly failures on the way to success. See 'How Not to Land an Orbital Rocket Booster' here)

🎁 Hey look...it's the first day of the Referral rewards program!

Well, that was a bit of a marathon today but I hope it was worthwhile.

But even if you didn't like it - especially if you didn't like it - please let me know what you think using the poll below. (And please leave a comment when you vote - it's really helpful to know what you think.)

Major elections and referenda 2023

• Andorra, Parliament

• Antigua and Barbuda, House of Representatives (January 18)

• Argentina, President, Senate and Chamber of Representatives (October 29)

• Bangladesh, Parliament

• Belarus, Parliament

• Benin, National Assembly (January 8)

• Bhutan, Parliament

• Bulgaria, Parliament

• Cambodia, National Assembly (July 23)

• Chile, Constituent Assembly

• Cuba, Parliament

• Cyprus, President (February 5)

• Czech Republic, President (13–14 January)

• Democratic Republic of Congo, President and National Assembly (December 20)

• Djibouti, National Assembly

• East Timor, Parliament

• Ecuador, Referendum (February 5)

• Estonia, Parliament (March 5)

• Eswatini, House of Assembly

• Finland, Parliament (April 2)

• Gabon, President and Parliament

• Greece, Parliament

• Guatemala, President and Parliament (June 25)

• Guinea-Bissau, Parliament (June 4)

• Haiti, President, Chamber of Deputies, Senate and Constitutional Referendum

• Kazakhstan, Parliament

• Liberia, President and House of Representatives

• Libya, President, Parliament and Constitutional Referendum

• Liechtenstein, Constitutional referendum (January 29)

• Luxembourg, Chamber of Deputies

• Madagascar, President

• Maldives, President

• Marshall Islands, Parliament

• Mauritania, Parliament

• Micronesia, President and Parliament

• Monaco, Parliament (February 5)

• Montenegro, President

• Myanmar, Parliament

• New Zealand, House of Representatives

• Nigeria, President, House of Representatives and Senate (February 25)

• Oman, Parliament

• Pakistan, National Assembly

• Paraguay, President, Senate and Chamber of Deputies (April 30)

• Poland, Parliament

• Rwanda, Parliament

• Sierra Leone, President and Parliament (June 24)

• Singapore, President

• Slovakia, Constitutional referendum (January 21)

• Solomon Islands, Parliament

• Spain, Parliament

• Switzerland, Federal Assembly

• Thailand, Parliament (May 7)

• Togo, Parliament

• Tokelau, General Fono (January 26)

• Tunisia, Parliament (2nd round) (January)

• Turkey, President and Parliament (May 14, June 18)

• Turkmenistan, Parliament

• Tuvalu, Parliament

• Ukraine, Parliament

• Zimbabwe, President and National Assembly

Check the National Democratic Institute for updates on election dates and progress.