Beyond the Headlines: Understanding Venezuela’s Market Impact

On Saturday, January 3, the U.S. captured Venezuelan President Nicolás Maduro in a military raid in Caracas and transported him to New York to face federal charges related to drug trafficking and narco-terrorism.

Following the arrest, Venezuela’s Vice President, Delcy Rodriguez, was swiftly appointed interim leader. U.S. President Donald Trump has asserted that the U.S. will be “in charge” of the country for the foreseeable future.

The historic events have raised questions about how further U.S. involvement in the oil-rich nation may influence markets and investor portfolios, both in the near-term and in the long-term.

Below, we break down what history – and current market structure – suggests investors should keep in mind.

Geopolitical Events Rarely Create Lasting Market Impacts

History shows that geopolitical shocks often trigger short-term volatility, but they rarely change long-term market trajectories.

Events such as conflict in Ukraine, unrest in the Middle East, terrorist attacks, and military actions have all produced temporary market pullbacks – often driven by fear, uncertainty, and rapid risk repricing. Yet, as the accompanying chart illustrates, markets have historically stabilized as attention shifts back to fundamentals such as earnings, employment, consumer demand, and economic policy.

In other words, geopolitical uncertainty is not an exception, it is part of investing. Recognizing this helps investors stay grounded and avoid reacting emotionally to fast-moving headlines.

Venezuela Matters to Oil – But Production Constraints Limit Short-Term Impact

Venezuela holds the world’s largest confirmed oil reserves – an estimated 304 billion barrels, according to the U.S. Energy Information Administration. For comparison, this surpasses even Saudi Arabia's 267-billion-barrel reserves.

However, Venezuela’s oil production has deteriorated sharply over the last two decades due to corruption, economic mismanagement, insufficient infrastructure investment, and economic sanctions.

Today, Venezuela produces less than one million barrels per day, down from a peak of approximately 3.4 million barrels per day in the late 1990s.¹

As a result, most near-term movements in oil prices are likely to be driven more by market sentiment than by real changes in supply. Any true production impact is far more likely to influence global markets closer to 2029 – 2030 than today.

Venezuela Represents a Negligible Share of Global Equity & Debt Markets

From a portfolio-exposure standpoint, Venezuela’s role is extremely small.

• Its domestic stock exchanges – Bolsa de Valores de Caracas – is small, illiquid, and largely inaccessible to global investors.

• Venezuela is not included in the MSCI Emerging Markets Index, meaning most diversified global portfolios have little to no direct exposure

On the fixed-income side, Venezuela has been in default since 2017. Outstanding sovereign bonds trade at distressed levels, and restructuring negotiations remain unresolved. Exposure among mainstream investors is therefore limited and concentrated among specialized distressed-debt holders.‍

FAM Dynamic Core Models: Disciplined Positioning Navigates Geopolitical Uncertainty

The Farther Asset Management (FAM) Dynamic Core Models are designed deliberately to weather periods like this.

We don’t attempt to predict specific geopolitical flashpoints. Instead, our approach prepares portfolios for a world where risks can become elevated, economic rates can change, and market conditions can shift quickly. 

This means emphasizing investments in high-quality companies with strong balance sheets, relatively defensive sectors, and increased exposure to U.S. government bonds.

The bottom line? Historical evidence demonstrates that portfolios constructed around long-term financial objectives can successfully navigate geopolitical uncertainty.

For more information, please contact your Farther advisor today who would be happy to discuss what this means for you and your portfolio.

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References‍

1. https://www.eia.gov/outlooks/steo/tables/pdf/3dtab.pdf