NTH/EFFECT

NthEffect models the cascade effects of geopolitical crises and identifies investment opportunities at each layer of impact.

When a major event disrupts global markets — a strait closure, a war, an energy shock — the obvious effects get priced in fast. Oil stocks surge on day one. But the 2nd and 3rd order effects take weeks or months to materialise: fertiliser shortages, food price spikes, energy transition acceleration, industrial supply chain redesign. By the time markets recognise these downstream effects, early movers have already positioned.

NthEffect maps these cascade chains, scores stocks by how much opportunity remains at each layer, and surfaces the dislocations between related instruments that signal mispricing.

The app tracks three types of instrument:

Manual picks — stocks with a hand-written investment thesis linking them to an active crisis event. Each thesis explains the causal chain from event to stock impact.

Sector peers — related companies that share similar exposure to the same cascade effects. Their scores are derived from the parent pick at a reduced weighting, reflecting lower analytical certainty.

Commodities — raw commodity prices (oil, gold, copper, agricultural futures) that drive the stock theses and provide macro context.

Every stock receives a composite score from 0 to 100 based on six weighted inputs:

Thesis strength — how direct is the causal link from crisis to stock benefit? A Gulf fertiliser producer halting exports directly benefits a US nitrogen manufacturer. A UK grocer benefiting from inflation is a weaker, more indirect link.

Priced-in headroom — how much of the thesis has the market already recognised? A stock up 50% YTD on crisis tailwinds has less room to run than one that's flat or down.

YTD headroom — raw price performance as a headroom indicator. Stocks that haven't moved score higher.

Momentum — 30-day price direction. Confirms whether the market is starting to recognise the thesis.

Resolution resilience — does this stock hold up if the crisis resolves tomorrow? Nuclear energy stocks benefit from a structural shift that persists regardless. Tanker stocks collapse the moment rates normalise.

News sentiment — recent headlines as a leading or contrarian indicator. Negative news on an underpriced stock with a strong thesis can signal an entry point.

A chain layer bonus gives a small uplift to 2nd and 3rd order stocks, reflecting the model's core thesis that downstream effects are systematically underpriced.

1st order — direct supply/demand shock. Oil prices, LNG disruption, shipping rates. Markets price these within days. High conviction but often fully priced.

2nd order — systemic ripple effects. Manufacturing squeezes, inflation resurgence, fertiliser shortages, semiconductor supply risk. Markets price these over weeks to months.

3rd order — deep structural shifts. Food price cascades, energy transition acceleration, transport mode shift, permanent supply chain redesign. Markets may take 6-18 months to fully price these.

The 1970s oil crises showed this pattern clearly: oil stocks repriced in weeks, but the nuclear buildout, Japanese car revolution, and gold's decade-long run took years to play out. The investors who made the most money positioned for the structural shifts, not the initial spike.

Every morning, NthEffect re-scores all instruments with fresh price and news data, runs an AI-assisted review of the active crisis thesis, detects dislocations between related instruments, and sends a summary email. The digest highlights score changes greater than 5 points, surfaces the top opportunities by score, and flags any commodity-to-stock or peer-to-parent divergences worth investigating.

The correlation engine watches for divergences between instruments that should move together:

Commodity → stock: gold surges but WPM is flat. Urea spikes but Mosaic hasn't moved. The commodity is signalling something the equity market hasn't caught up to yet.

Parent → peer: CF Industries runs 8% but Yara is flat. Either Yara is a catch-up opportunity, or the move is company-specific rather than sector-wide. Either way, the divergence is worth investigating.

These aren't trade signals — they're prompts to look more closely.

The model is built around events — geopolitical or macro shocks that create cascade effects. Each event has its own cascade model mapping 1st, 2nd, and 3rd order effects, with stocks tagged to the layers they benefit from.

A stock can be tagged to multiple events. Its score is driven by the strongest active event thesis, with a small bonus for multi-event exposure.

Currently tracking five events across active, chronic, and scenario states — including the Strait of Hormuz Crisis, Red Sea / Houthi Escalation, AI Capex Overbuild, Ukraine War / Russia Sanctions, and a modelled Taiwan Blockade Scenario.

This is an analytical model for research and discussion. It is not financial advice. All investments carry risk. The scoring engine reflects one analytical framework — it is not predictive and does not guarantee returns. Scores can change significantly on new data. A diplomatic resolution or ceasefire would rapidly unwind many crisis-linked positions. Always do your own research.