Thoughts on the Market — How Venezuela Events Could Affect Markets and Policy

Date: January 6, 2026
Host: Michael Zesas (Deputy Global Head of Research, Morgan Stanley)
Guest: Mariana Salvatore (Head of Public Policy Research)

Episode Overview

This episode explores the geopolitical and market implications of recent dramatic events in Venezuela—specifically, the US capture and arrest of President Nicolás Maduro. The conversation bridges global policy shifts, US domestic decision-making patterns, and the direct impact on oil markets and sovereign debt. The hosts provide insights relevant to investors as they weigh how such geopolitical shocks shape risk, asset classes, and broader trends in US foreign policy.

Key Discussion Points & Insights

1. US Intervention in Venezuela: Context and Immediate Market Reactions

(00:56 – 03:32)

• The capture of Venezuela’s president by US forces is described as a significant development with far-reaching implications, especially for oil, energy equities, sovereign credit, and hemispheric politics.
• The move is characterized as consistent with the Trump administration’s year-long emphasis on linking economic and national security interests.

“This is really just another data point in a preexisting longer term trend toward multipolarity... that involves linkage of economic and national security interests.”
—Mariana Salvatore, 01:35

• Trend toward multipolarity: The hosts situate the event within a global pattern—noting elevated defense spending as nations respond to insecure geopolitics (01:46).

2. Policy Implications: US Foreign and Domestic Policy

(01:30 – 02:48)

• USMCA Review:
  • The US is likely to wield more leverage over Mexico in upcoming US-Mexico-Canada Agreement negotiations, using recent events to press for stricter barriers against Chinese investment and products.
  • Enforcement and potential tariffs on non-compliant goods could increase during these talks.

“The US has likely even more leverage... likely is going to push even harder for Mexico to put up trade barriers or take active steps to limit Chinese investment or influence in the country.”
—Mariana Salvatore, 02:09

• Domestic Policy:
  • The White House is relying more on executive authority—bypassing Congress and adopting faster, more unilateral approaches.
  • This shift increases policy uncertainty and the risk premium for investors.

“We’re just seeing an increasingly diminished role for Congress to play... That in itself just increases policy uncertainty and risk premium, I would say, across the board.”
—Mariana Salvatore, 02:53

3. Impact on Oil Markets and Sovereign Credit

(03:32 – 04:50)

• Oil Market Response:
  • Despite Venezuela’s massive oil reserves (17% of global reserves), its real output is under 1% of global production.
  • Immediate supply disruptions are not expected, so oil prices have not responded dramatically.
  • Over the medium term, Venezuela’s output risk could increase, but the system can absorb such changes with limited impact.

“While Venezuela famously holds one of the largest oil reserves in the world... in terms of production, its contribution is relatively small... so you wouldn’t expect there to be any real meaningful supply impact to the markets, at least in the near term.”
—Michael Zesas, 03:52

• Sovereign Bonds and Emerging Markets:
  • Venezuelan bonds, long priced for low recovery values and distant restructuring, have rallied as investors anticipate US involvement could accelerate restructuring and boost recovery values.
  • Limited “spillover” is expected across broader Latin American sovereign credits, but Mexico and Colombia could underperform due to exposure to oil prices and potential competitive impacts from higher Venezuelan production.

“Our EM sovereign credit strategists anticipate limited spillover to broader latam sovereign credit... differentiation is more likely to reflect degrees of alignment with the US and exposure to oil prices.”
—Mariana Salvatore, 04:52

4. Strategic and Thematic Takeaways for 2026

(05:09 – 05:27)

• The US action in Venezuela demonstrates a readiness to intervene in the Western Hemisphere, suggesting investors should expect further policy moves linked to US interests and security.
• The episode ends with agreement that this theme will likely stay relevant throughout the year as such policy-driven shocks continue to shape markets.

"The US Actions in Venezuela seem to be a demonstration of the government's willingness to intervene in the Western Hemisphere to protect its interests more broadly.”
—Michael Zesas, 05:09

Memorable Quotes

| Time | Speaker | Quote | |---------|--------------------|-------| | 01:35 | Mariana Salvatore | “This is really just another data point in a preexisting longer term trend toward multipolarity... that involves linkage of economic and national security interests.” | | 02:09 | Mariana Salvatore | “The US has likely even more leverage... likely is going to push even harder for Mexico to put up trade barriers or take active steps to limit Chinese investment or influence in the country.” | | 02:53 | Mariana Salvatore | “We’re just seeing an increasingly diminished role for Congress to play... That in itself just increases policy uncertainty and risk premium, I would say, across the board.” | | 03:52 | Michael Zesas | “While Venezuela famously holds one of the largest oil reserves in the world... in terms of production, its contribution is relatively small... so you wouldn’t expect there to be any real meaningful supply impact to the markets, at least in the near term.” | | 04:52 | Mariana Salvatore | “Our EM sovereign credit strategists anticipate limited spillover to broader latam sovereign credit... differentiation is more likely to reflect degrees of alignment with the US and exposure to oil prices.” | | 05:09 | Michael Zesas | "The US Actions in Venezuela seem to be a demonstration of the government's willingness to intervene in the Western Hemisphere to protect its interests more broadly.” |

Important Segment Timestamps

• US intervention & implications for multipolarity: 01:07 – 01:46
• USMCA leverage and trade policy: 02:09 – 02:43
• Executive authority and domestic policy shift: 02:48 – 03:32
• Oil markets and sovereign bond impact: 03:32 – 04:50
• Emerging Markets and regional bonds: 04:50 – 05:09
• Strategic/political theme for 2026: 05:09 – 05:27

Tone and Language

The conversation is analytical, concise, and collaborative, blending policy expertise with market strategy insights. The hosts’ tone is matter-of-fact and measured, focused on implications rather than speculation.

In summary:
The US intervention in Venezuela is emblematic of a global shift toward multipolarity and highlights a new, more unilateral phase in US policymaking. Investors are urged to monitor the evolving risk landscape in sovereign credit and oil, as political moves increasingly drive market volatility and opportunity—especially in the Western Hemisphere.