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December ADP and Venezuela Update +2

09:38 07-Jan-26

This morning's ADP report for December headlined at +41K jobs, which was in line with or slightly below various estimates.  Smaller businesses staged a rebound from the prior report, and pay remained up 4.4% YoY and 2% more than that for job changers.  American equity futures were modestly negative before the report as we move out of the window dressing phase of the new year.  This is likely to be taken as a minor positive, but it is probably not enough to move the Fed off hold for its month end meeting.  FedWatch still shows chances for a quarter point cut well below 20%.

The latest news on Venezuela is that America has just seized the tanker that previously evaded its blockade.  A Russian submarine in the area heightens the tension, but Venezuela will also be handing over 30-50M barrels of oil, supposedly worth about $2.5b, for use by American refiners with some of the proceeds supporting transition to an elected regime.  We'll see how that turns out over time, but the market remains focused on the short to medium term, with SLB retaining most of its recent gain as predicted in our CrowdWisers parent service:

Delcy Rodriguez, Maduro's VP, has been sworn in as acting President of Venezuela, and after the initial harsh words below, does seem to be willing to deal with Washington, as expected.  Even so, Marco Rubio, for whom the ouster is at least a short term win political win, stated that Rodriguez is not a legitimate leader.  Instead, it looks like the White House will be pushing for an election in Venezuela, but Trump will face another Senate vote on his use of war powers without approval from Congress next week.  I expect that to fail again, with reactions there gravitating back toward party lines.  That's furthered by Rubio expecting no more military action, though he is making this service's prediction that pressure would turn towards Cuba look prescient.

For his part, Trump is looking for unfettered access to the country's proven oil reserves, which are by far the world's largest.  However, even if a power transition occurred smoothly, dramatically increasing production would still likely be a long and complicated road.  

What is more certain that geopolitics is becoming a might makes right wild west.  Consequently, I see the immediate dollar strength in currencies as more than a short-term knee jerk flight to safety, since America's military is still preeminent...

A strong dollar works more vaguely against most American stocks over the medium term, but as ever, the devil in the details.  If Venezuelan hydrocarbon infrastructure does wind up being brought up to speed, that could be a major windfall for Slb...

In summary, though the midterms remain of interest, this represents another destabilizing geopolitical shock whose effects are likely to ripple through the investing landscape even after Trump is only a memory.

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