Venezuela's turning point: Market implications

The news from Venezuela is striking and, for many, unsettling. The human dimension matters: Safety, livelihoods, and the hope for institutional stability are not abstractions—they affect real people in real time.

These moments often create the sense that markets must be bracing for something big. But one of the lessons of market history is how often the opposite is true: Geopolitical events, even when they feel seismic or unsettling, tend not to be market events.

Here’s a look at why that might be the case with the news out of Venezuela—and why even in the face of a starkly uncertain world, the outlook for investors actually still appears constructive.

Why markets often don't move with geopolitics

Decades of market history suggest that most geopolitical shocks don’t change the long-term trajectory of stocks.

This is not because the events aren’t important. Rather, it’s because these events typically don’t generate the kind of economic catalyst—something that alters credit creation, aggregate demand, or earnings—that can move the needle for markets in a durable way. Leadership changes, sanctions, protests, and even regional conflicts typically remain limited in impact to a specific country or sector, unless there is some kind of channel (like oil prices) that extends their impact to the broader global economy.

That pattern helps frame Venezuela today. Despite the headlines, this is not obviously a systemic market event.

Even major global conflicts historically haven’t produced the kinds of long-term, systemic breaks people often expect. Markets have a way of adjusting quickly, pricing in potential risk sooner than it appears in the news, and focusing on the economic mechanisms that matter for earnings and growth.

What’s different—or not different—about Venezuela?

In the case of Venezuela, the key economic channel to watch is oil. And here’s where the story becomes more nuanced.

Venezuela has the world’s largest proven oil reserves, but over the past 2 decades its production has fallen dramatically. What used to be more than 3 million barrels a day is now closer to 1 million—and that’s on a good month. Infrastructure has aged, foreign investment has dried up, and years of operational challenges have taken a toll.

So even though Venezuela is a huge oil reserve holder, it is currently a very small oil producer on the global stage—accounting for less than 1% of global oil production. That limits the magnitude of any potential shock.

Here’s the nuance: If governance stabilizes and foreign investment into the country returns, Venezuela could increase its oil production. This outcome isn’t guaranteed—and certainly won’t happen overnight. Even in an optimistic scenario, meaningful increases would take years.

But markets tend to look ahead. Based on my research, I believe the price of oil can discount future increases in supply well before they actually arrive on the market. So even if 2028 is the soonest Venezuelan production might noticeably rise, oil prices could adjust well before that.

What that could mean for inflation, the Fed, and consumers

Oil is one of the most influential drivers of inflation over time. Because so many inputs—transportation, manufacturing, logistics—are tethered to the barrel, it’s hard to get durable disinflation without energy cooperating.

If the events in Venezuela precede a shift toward more future supply, even years from now, oil prices could stay softer than they otherwise would, providing a disinflationary tailwind. Lower oil prices create a real, measurable benefit to consumers—like a tax break for households.

That kind of disinflationary tailwind could even give the Fed more breathing room to further lower interest rates, helping bolster the overall economy and providing particular support to firms like banks and small businesses, which are more sensitive to interest rate dynamics.

Again, none of these outcomes is guaranteed. But in the market’s surprisingly quiet reaction this week, one data signal stood out to me: Credit spreads narrowed. Credit spreads represent the additional interest investors demand in exchange for taking on default risk. When they narrow, it signals bond investors expect greater economic strength ahead, rather than greater stress. And credit spreads have historically been better predictors of economic trouble than geopolitical worry.

Where that leaves markets now

One of the biggest challenges investors face is that headlines feel actionable and urgent. But history shows that:

• Trading on headlines rarely works.
• Markets often anticipate the news before the news breaks.
• It’s easy to focus on potential headwinds and miss the quieter, offsetting tailwinds.

US markets are starting 2026 on generally strong footing. Earnings expectations are strong, tax and interest rate cuts are providing a tailwind, and stocks have momentum.

The backdrop is not perfect—uncertainties such as a soft job market and an uneven economic recovery still exist. And the news out of Venezuela may contribute to a broader sense of geopolitical uncertainty and instability. But if we focus on our narrow job as investors—assessing the market conditions rather than our feelings about the headlines—there's actually a lot to like about uncertain environments. Some uncertainty is often better for investors than perfect environments, because perfect environments can be breeding grounds for excesses, investor euphoria, and bubbles. In fact, uncertainty may even allow economic expansions to persist for longer, by tamping down investor euphoria.

Ignoring every headline isn’t the goal—but letting headlines push investors off their long-term plan rarely pays.