- We expected our weekly note to be a recap of 2025 market performance. However, geopolitics intervened. Instead, we highlight the U.S.-led extraction and arrest of Nicolas Maduro as the most impactful event of the past week. We welcome a transition in Venezuela, with the end of the Chavismo era coming quickly following U.S. intervention. Maduro has been arrested and brought to the U.S. on narco-terrorism and related charges.
- President Trump indicated the U.S. intends to “run” Venezuela, but with relatively scant details as to what that means. For the time being, the U.S. is working with Vice President Delcy Rodriguez, as the second-in-command to Maduro remains the de facto leader. We believe that the current situation is merely a transitional step, with ongoing oversight from the U.S. and implicit threat of her removal if she proves uncooperative with U.S. goals. So far, neither Nobel Peace Prize winner Machado nor 2024 President-elect Gonzalez have been included in the transition plans based on press reports.
- The transition is welcome for the millions of Venezuelan people who have suffered from a declining quality-of-life or been forced to leave their country in the past two decades. We note that the Venezuelan diaspora is one of the largest out-migrations in modern times, with nearly 8 million Venezuelan people leaving their country since 2014. GDP per capita in Venezuela has fallen from over $12,000 in 2012 to around $3,000 today.
- The U.S. action, while unexpected, had been telegraphed for some time with the build-up of troops and military personnel in the Caribbean region. As a result, Venezuelan sovereign and PDVSA bonds have rallied in recent months. Prior to this action, quotes put both PDVSA and Venezuela sovereign in the 20-30s range, after falling to as low as single digits after sanctions were imposed in 2018. Early indications show PDVSA and Venezuela sovereign bonds rising by 6-8 points across the curve to the high 30s and low 40s range.
- We do not maintain a formal recommendation for Venezuelan bonds, as they remain in default. Still, we expect to see optimism about possible re-entry of Venezuela into the global capital markets. Some market participants have called for a recovery value in the 50-60 cents range.
- That said, we caution that a formal reorganization of Venezuelan sovereign debt is likely to be a long process involving the multi-national lending organizations such as the IMF and World Bank, existing bondholders, the new Venezuelan government, and other parties with interest in the region such as the oil majors and China (which has existing loans and oil purchase agreements). The U.S. may play an active role in getting all the parties to the table given its interest in the region.
- We highlight that Venezuela’s economy shrunk under Maduro, with material declines in GDP. The economy’s output remains tied to oil, but we note that currently Venezuela represents only about 1% of global daily production.
- Venezuela has endured hyperinflation in recent years. Although it has cooled somewhat, it remains at a 270% annual rate, per IMF estimates. We also note the country has not published reliable economic statistics in several years. This makes economic forecasting mere guesswork considering the elevated uncertainty over the path forward.
- We also note that the infrastructure in Venezuela overall, and within its energy sector in particular, has faced years of neglect. We are optimistic that given the nation’s large proven oil reserves, the country’s abundant natural resources should allow the country to achieve better quality-of-life and income for its citizens over time. We caution that there have been no official macro-economic statistics from Venezuela in years, and the rebuilding of institutions and government is likely to take time.
- The U.S.-led action also illustrates the geopolitical strategic importance of the Latin America to the U.S., which we believe is a positive for the region as a whole. We expect that U.S. multi-national corporations will be invited to participate in the reconstruction phase for Venezuela. Smaller entrepreneurs and businesses in Venezuela will also surely benefit from the re-opening of the economy. Re-integration into global financial markets is also key.
- We will review U.S. macro-economic and market data in our next AM Call publication, as we dedicate this edition to developments in Venezuela.
For additional insights, be sure to check out last week’s blog post.
Definitions, sources, and disclaimers
This content is being published by Amerant Investments, Inc (Amerant Investments), a dually registered broker-dealer and investment adviser registered with the Securities and Exchange Commission (SEC) and member of FINRA/SIPC. Registration does not imply a certain level of skill, endorsement, or approval. Amerant Investments is an affiliate of Amerant Bank.
Definitions:
- Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).
- GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
- The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earnings of workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
- Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
- The Consumer Price Index (CPI): Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
- The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a percentage of the labor force. Source: Bureau of Labor Statistics (BLS).
- The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work.Source: Bureau of Labor Statistics (BLS).
- Advance Monthly Sales for Retail and Food Services: Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
- Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
- The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
- The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).
Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO).
Financial Markets – Recent Prices and Yields, and Weekly, Monthly, and YTD (Table): Bloomberg, Weekly Market Data is in USD and refers to the following indices: Macro & Market Indicators: Volatility (VIX); Oil (WTI); Dollar Index (DXA); Inflation (CPI YoY); Fixed Income: All U.S. Bonds (Bloomberg Aggregate Index); Investment Grade Corporates (Bloomberg US Corporate Index); US High Yield (Bloomberg High Yield Index), Treasuries (ICE BofA Treasury Indices); Equities: U.S. Industrials (Dow Jones Industrial Average); U.S. Large Caps (S&P 500); U.S Tech Equities (Nasdaq Composite); European (MSCI Euope), Asia Pacific (MSCI AP), and Latin America Equities (MSCI LA); Sectors (S&P 500 GICS Sectors) Source: Bloomberg. Fed Funds Rate probabilities, Source: CME FedWatch Tool.
Important Disclosures:
The information provided here is for general informational purposes only and should not be considered a customized recommendation, personalized investment advice offer, or solicitation for the purchase or sale of any security or investment strategy. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own situation before making any investment decision.
This information is obtained by AMTI from third-party providers from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. All expressions of opinion are subject to change without notice in reaction to changes in market conditions. By using such information, you release and exonerate AMTI from any responsibility for damages, direct or indirect, that may result from such use. Consult the issuer of any investment for the most up-to-date and accurate information.
All references to performance refer to historical data. There could be benchmarks used that do not reflect the performance of funds or other products with similar objectives
Presentation does not apply in jurisdictions where its use has not been approved. Some products or strategies may be complex or unusual. Make sure you have a clear understanding of the products before investing. Investments may have different tax consequences in different jurisdictions and will depend on the circumstances. AMTI does not offer legal or tax advice, please consult your legal, CPA, or other tax professional regarding your situation.
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Additional Risks:
- Past performance is no guarantee of future returns.
- There is no assurance the Fund will pay distributions in any particular amount, if at all. Any distributions the Fund makes will be at the discretion of the Fund’s Board of Trustees
- There can be no assurance that any Fund or investment will achieve it objectives or avoid substantial losses. Actual results may vary
- The value of the investments varies and therefore the amount received at the time of sale might be higher or lower than was originally invested. Actual returns might be better or worse than the ones shown in this informative material.
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- Volatile markets: Because an investor may be unable to sell its shares, an investor will be unable to reduce its exposure in any market downturn
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