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Trading the Globe: Egypt Outcomes

While no one can be sure what the outcome will be from the turmoil in Egypt, David Riedel of Riedel Research tells us 3 scenarios are most likely.

Outcome 1: Mubarak leaves quietly in the middle of the night and the El Baradei coalition takes over in a transitional government.

According to David Riedel this would lead to great jubilation short-term but adds Islamic-leaning groups are better organized than the secular groups so that would be the next thing for markets to worry about.

Market Reaction: Short-term weakness in the dollar but a lot more volatility in equities for 2011.

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Outcome 2: Protestors are satisfied by the changes made by Mubarak and there is relative quiet until the scheduled Sept. elections

This is less likely that the outcome above, says David Riedel, because the main thing the protestors want is for Mubarak to resign and they have been bold enough to defy the curfew to drive home their point.

Market Reaction: If protestors were satisfied by changes to the current government, the risk trade would be back on, although markets would be choppy for 2011.

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Outcome 3: There’s a massive bloody crackdown with many deaths and the population is cowed by a strong police state.

This is the worst outcome for US investors, according to David Riedel, because it would jeopardize the 3-4 million barrels of oil that go through the Suez Canal.

Market Reaction: It’s probably good for the US dollar as a safe haven but bad for everything else.




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