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Larry Berman: Geopolitical Tensions and U.S. Mid-Terms to Drive Market Volatility
Finance · Investment Managers · bnn_bloomberg · 2026-08-31
Investment strategist Larry Berman discusses how Middle East tensions, inflation, and upcoming U.S. elections are shaping the outlook for interest rates and key sectors.
What Happened
Geopolitical Impact on Inflation: Larry Berman highlights the strong historical correlation between global oil prices and U.S. consumer inflation. He argues that rising tensions in the Middle East and a retreat from globalization make the Federal Reserve's 2% inflation target increasingly difficult to achieve through standard policy adjustments.
Monetary Policy Outlook: The market is currently pricing in a 'higher for longer' interest rate environment following recent commentary from Kevin Warsh. While the bond market anticipates potential rate hikes, Berman suggests that minor policy tweaks will likely be insufficient to counter inflationary pressures from tariffs or energy costs.
Fiscal Policy and Elections: The analyst emphasizes that the U.S. fiscal trajectory remains a primary concern for the FOMC, necessitating coordination with the Treasury to manage the growing debt burden. He suggests that the upcoming mid-term elections could lead to legislative gridlock, potentially creating a fiscal cliff that impacts broader economic growth.
Strategic Investment Positioning: Looking ahead to potential post-election shifts, Berman suggests that a change in administration could lead to escalated actions regarding Iran. He advises investors to consider tactical positions in the energy and defense sectors to capitalize on potential market volatility and geopolitical developments.