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U.S. Strike on Venezuela

Recent geopolitical developments involving Venezuela have understandably drawn increased attention from investors and market participants. As with many global events, headlines can create short-term uncertainty and volatility, making it important to separate immediate market reactions from longer-term fundamentals. We believe it is our responsibility to provide clear context, disciplined analysis, and perspective on how such events may—or may not—affect your portfolio and long-term financial objectives.

At present, our assessment is that developments in Venezuela are influencing markets primarily through heightened geopolitical risk sentiment and energy-related price movements, rather than signaling a structural shift in the U.S. economic outlook. The dominant drivers of U.S. markets remain inflation trends, interest rates, corporate earnings, monetary policy, and the broader global macro environment. While geopolitical events can introduce short-term volatility, they do not, in isolation, alter the underlying framework that guides our portfolio construction and risk management process.

We don’t believe Venezuela is the match that lights the fire to a new bear market, but it is another reminder that we are operating in a world characterized by more geopolitical risk, greater regime uncertainty, and less margin for policy error. In this environment, disciplined portfolio construction, diversification, and a long-term investment horizon are more important than ever.

In the following commentary, we outline how we are evaluating these developments through base, bull, and bear scenarios, and how they fit within our existing portfolio strategy. We will continue to monitor conditions closely and make thoughtful, evidence-based decisions as warranted, always with an emphasis on long-term discipline rather than short-term reactions. As we prepare this letter on Saturday afternoon, most global markets are closed, and live market reactions are not yet available; we will be closely monitoring futures markets as they open on Sunday and will continue to assess developments as new information emerges.

What Happened

The United States carried out a large-scale military operation in Venezuela that resulted in the capture of President Nicolás Maduro and his wife, who were subsequently flown out of the country. U.S. officials have stated that Maduro has been indicted in the Southern District of New York on charges related to narco-terrorism and drug trafficking offenses against the United States.

Why This Matters for the U.S. Markets

Unexpected geopolitical events, particularly those involving military action, can introduce short-term uncertainty and increase market volatility. Some degree of market reaction would not be unusual, especially at the start of the trading week ahead.

From an economic perspective, Venezuela’s relevance to global markets is primarily tied to energy. The country is estimated to hold approximately 17% of the world’s proven oil reserves. While years of mismanagement, underinvestment, and sanctions have significantly reduced their production and export capacity, Venezuela still plays a role in global oil supply dynamics. Developments that affect supply expectations can influence energy prices, inflation expectations, and equity performance in the short run.

How This Could Affect U.S. Markets

While Venezuela is relevant from a global energy perspective, its direct economic footprint in the United States remains limited. As a result, the primary transmission channels to U.S. markets are indirect and operate mainly through expectations rather than immediate economic disruption:

· Energy prices: Shifts in oil risk premia can influence headline inflation and near-term market sentiment. While Venezuela holds a significant share of global oil reserves, current production constraints limit its immediate impact on global supply.

· Risk appetite: Heightened geopolitical uncertainty can temporarily pressure equities and credit, particularly during periods of thin liquidity or elevated macro sensitivity.

· Regional spillovers: Latin American markets may experience higher volatility, with second-order effects on U.S. multinationals and assets sensitive to emerging-market conditions.

At this stage, these channels remain expectations-driven, rather than reflective of material disruptions to U.S. growth or corporate fundamentals.

The following sections outline our base, bull, and bear scenarios and assess how each could affect U.S. and regional markets, with a focus on portfolio implications across asset classes.

Market Scenarios and What They Could Mean for Portfolios

The table below summarizes several mid-to-long-term market scenarios—base, bull, and bear cases—and how each could affect U.S. markets and investment portfolios. These scenarios consider how global developments may influence energy prices, market volatility, and investor sentiment, as well as how portfolios are positioned to respond. The goal is to provide context around recent headlines and explain how different outcomes could impact portfolios over time.

Scenario

Core Assumptions (Global Reaction)

U.S. Market Impact

Energy & Inflation

Regional / EM Impact

Portfolio Implications

Base Case – Contained Uncertainty

Global responses remain primarily diplomatic and de-escalatory; no coordinated sanctions or systemic trade shock

Volatility remains contained; earnings, interest rates, and Federal Reserve policy continue to dominate market direction

Temporary oil risk premium; no sustained supply disruption or structural inflation impact

Elevated volatility in Latin America with limited spillover into U.S. markets

Maintain neutral positioning; treat volatility as transitory and avoid reactive adjustments

Bull Case – Stabilization & Coordination

International coordination shortens the period of uncertainty and reduces tail risks

Improving risk appetite supports U.S. equities, with broader participation and cyclical leadership

Gradual easing of energy risk premia; modest inflation relief

Improved EM sentiment; selective upside in Latin America and for U.S. multinationals

Incrementally tilt toward risk assets; gradually reduce defensive positioning

Bear Case – Escalation & Fragmentation

Global responses amplify uncertainty through sanctions friction, geopolitical escalation, or energy market stress

Risk-off pressure on U.S. equities accompanied by tighter financial conditions

Sustained oil price increases push inflation expectations higher

Widening EM spreads and FX weakness feed back into global risk sentiment

Emphasize capital preservation; overweight high-quality bonds, defensives, and

Asset-Class and Portfolio Implications (U.S.-Centric)

At present and in most of our portfolios, we believe there is insufficient evidence to justify portfolio changes based solely on this development. Our investment approach remains disciplined and data-driven, focusing on fundamentals rather than reacting to headline risk. We will continue to monitor how this situation intersects with broader macroeconomic conditions, particularly energy markets and inflation dynamics.

To provide additional context, the table below summarizes our asset-class views across base, bull, and bear scenarios, framed through a U.S. market lens. These views are intended to guide portfolio positioning and risk-management discussions, rather than reflect short-term trading decisions.

Scenario-Based Asset Allocation Framework

Asset Class	Base Case	Bull Case	Bear Case
U.S. Equities	Neutral to Modestly Overweight — Core fundamentals (earnings resilience, interest-rate path, and policy support) remain the primary drivers	Overweight — Improving risk appetite, expanding breadth, and cyclical leadership	Underweight — Inflation reacceleration, tighter financial conditions, and valuation compression
International Equities	Neutral — Diversification benefits remain intact, with selective opportunities by region	Overweight — Global stabilization, easing financial conditions, and improved risk sentiment	Underweight — Slower growth, energy sensitivity, and elevated geopolitical risk
Emerging Markets	Underweight — Higher volatility, capital-flow sensitivity, and currency risk	Selective Neutral to Overweight — Tactical, region-specific opportunities driven by sentiment and policy	Underweight — FX weakness, spread widening, and risk aversion
Fixed Income	Neutral — Emphasis on quality, income generation, and balanced duration	Gradual reduction in duration — As growth and risk appetite improve	Overweight high-quality duration — Flight-to-quality dynamics and declining growth expectations
Alternatives	Neutral — Portfolio diversification and volatility management	Overweight growth-oriented alternatives — Infrastructure, select real assets, and opportunistic strategies	Overweight defensive alternatives and real assets — Inflation hedging and capital preservation
Cash	Neutral — Liquidity, flexibility, and optionality	Underweight — Gradual deployment as uncertainty recedes	Overweight — Capital preservation, liquidity, and tactical flexibility

Closing Summary and Portfolio Perspective

Venezuela stands at a historic inflection point. The sudden removal of Nicolás Maduro has created a period of political transition marked by uncertainty around governance, security, humanitarian conditions, and regional stability. In the near term, unresolved questions surrounding political authority, internal security, refugee flows, oil production, and international legal considerations will continue to shape headlines and contribute to elevated uncertainty.

From a market perspective, these developments are being transmitted primarily through an increase in geopolitical risk premium rather than through a deterioration in underlying economic fundamentals. Historically, markets tend to price in regime-change risk relatively quickly, after which attention returns to earnings, liquidity, monetary policy, and broader macroeconomic conditions. While we expect near-term volatility to remain elevated, particularly across global and emerging markets, this environment does not currently represent a fundamental earnings shock to U.S. corporations.

Within equity markets, we anticipate short-term volatility and some degree of sector rotation toward more defensive and real-asset-linked areas such as energy, defense, utilities, and healthcare, with continued pressure on higher-multiple, duration-sensitive growth stocks. Over the intermediate term, U.S. markets have historically demonstrated resilience in the face of localized geopolitical disruptions unless accompanied by a sustained energy shock or broader global escalation.

Gold continues to play its traditional role as a strategic diversifier in periods characterized by geopolitical instability, policy uncertainty, and rising tail risks. The current situation reinforces longer-term themes rather than introducing a singular market-moving catalyst, supporting gold’s role as a risk-management asset within diversified portfolios.

As always, our focus remains on disciplined portfolio construction, diversification, and alignment with long-term objectives rather than reactive adjustments driven by headlines. Geopolitical events can create short-term uncertainty, but maintaining perspective and adhering to an appropriate risk framework has historically proven to be the most effective course for long-term investors.

If recent developments have prompted any reassessment of your risk tolerance, time horizon, or portfolio objectives, we encourage you to reach out to discuss your current positioning. We will continue to monitor developments closely and provide updates as conditions evolve.

Our investment team will continue to monitor developments closely and provide updates when appropriate.

Thank you for your continued trust,

SPG Advisors

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