Blain’s Morning Porridge 8^th Sept 2025 – When Politics and Markets collide – look the other way!

“It was the age of wisdom, it was the age of foolishness.”

Last week the Axis of Autocracy gathered to watch a spectacular military parade. Here in the West governments are tripping over themselves as politics become ever more polarised and ineffective. How should these factors inform investment decisions?

A tale of three cities this morning: Washington, Paris and London

The difference between trading and investing is simple.

• Trading is reading market mood and sentiment – which for the next few days is going to be all about how much stocks are going to rise ahead of the Fed’s rate cut next week – even though Friday’s payroll numbers hint at stagflation ahead.
• Investment is about working out what will work and what won’t, and the risks associated with these choices – which is increasingly about figuring how much the world is changing, including how democracy is flailing.

Let’s start in Washington.

I you were the CEO of a global firm that had abased yourself in front of Donald Trump’s throne promising billions of dollars of investment into the US economy, and then found your construction team at a massively expensive and transformational plant under construction in a MAGA state had been arrested under the glare of the TV lights, then left to rot in an illegal immigrant deportation camp…. What kind of signal would that send regarding your future investment plans?

Trump’s ICE Stormtroopers arrested nearly 500 South Koreans working to build a critical Hyundai EV battery plant in Georgia last week. A massive win for ICE and homeland security on Fox media. A massive embarrassment for the South Koreans who had danced to Trump’s tune, promising to  build new manufacturing plant in the USA. A solution will be fudged whereby the arrested workers will be quietly repatriated without charge to Korea. It looks a clear lack of coordination between Trump’s delivery of conflicting policy objectives – immigration vs foreign investment.

There was a time when the investment world would have fretted about such inconsistencies. But you know exactly how it will play out – it will be added to the list of multiple outrages Trump has inflicted upon America and nobody will bat an eyelid. His supporters will call it necessary. No one is listening to his detractors. The opposition Democrats will make some meaningless unconnected noise about the raids, their supportive press will write furious headlines decrying the foolishness of it all – which everyone will soon forget.

But, but and but again, around the globe the factory arrests will further convince governments and  firms struggling to understand the Trump phenomena not to rush into America. It has become too inconsistent. It is no longer the America we once knew it to be, and thought it was constitutionally bound to remain. Firms will still make promises of major investments, but stall opening their wallets as they calculate how much longer Trump will remain significant against how long they can delay. If America is transactional, then be transactional back.

The Bottom Line is Trump’s revolution has pretty much succeeded – Trump now controls, without question, the panoply of state from the judiciary, the agencies and infrastructure, and the legislature. There is nothing holding him back. And even better, (for his legacy), when it all goes horribly, horribly wrong – history will probably blame the Democrats for not stopping him.

For democracy to function and not slide into autocracy, it needs balance; political force to be countered by political force. Thus far the Democrats have tried to pretend they have adopted a “don’t interrupt your enemy while they are making mistakes” approach – but the reality is they are rudderless, leaderless and still dithering in the wake of the chronic mistake of not replacing Biden sooner – and the rest of the Democrat gerontocracy – well ahead of last year’s election. History will write libraries about the Trump era – and place the blame squarely on the Democrats.

A major test is coming – at the end of September the US will hit yet another “debt ceiling” – a repeating crisis requiring 60% of the legislature to approve an extension. That gives the Democrats the possibility of a pyric victory vs Trump, plunging the US Government into crisis, seeing millions of workers and bills unpaid. It’s a war the Democrats would lose – giving Trump’s well-oiled propaganda machine the opportunity to pin all the blame for disruption upon them. It’s unlikely they will win any concessions trying to negotiate any kind of scale back by Trump. Yet, if they support the debt ceiling resolution – they will look even less relevant, further draining support from the Party.

Hence, smart eyes are on Governor Gavin Newsom of California – who is the first mainstream Democrat actively mounting a fightback. He is winning – by aping Trump’s style and markets in a deliberate and quite amusing attempt to undermine him through deliberate trolling, insults and winding up the President. It’s working – Trump is livid and overacting. But a small win in California will not change the new USA. I wonder if Newsom is chatting to Mark Carney about expanding Canada? (Heh, heh, heh…)

The reality? If you are planning the investment risks that might follow the USA becoming a one party autocratic state – then you already missed that boat. It happened. Invest accordingly. At this stage I reckon that means Short the Long-end of the T-Market, Long the Short end, and buy stocks on the basis Trump will demand QE to control rates. (I would also be massively short the dollar…. just saying.)

On to Paris…

The French are revolting. That’s pretty much the historical reality of the last 240 years – government crises have occurred every second decade or so since the Revolution. Later today President Macron’s latest prime minister – the fourth in 18 months – will be shown the door when he loses a confidence vote on austerity welfare spending to balance the burgeoning deficit. France is caught in the irresistible political force meets reality trap – under which the only winners will be the hard right populist National Rally party of Marine le Pen, even though she is still fighting to regain the right to stand for office.

Macron and Trump stand at different ends of the political power scale. And as one of the most powerful European States, France is supposed to be a reliable partner for The West to rally around, but it’s in a dither. That’s one reason peace in Ukraine has become such an omnishambles. Trump has all the Power. Macron has none. That explains much of the new relationship between Europe and the USA, and the contempt Trump holds him, and thus the whole continent, in..

And in London…

The UK’s new Labour government looks a right mess. Deputy PM Angela Rayner forced to resign after a VAT scandal/mistake. A cabinet reshuffle that saw ministers switched between ministry seats – pretty much ensuring the Bureaucrats of the Civil Service remain fully in control – reinforcing the concern Labour is trying far too hard not to rock the boat by enacting the necessary radical and transformative policies the UK needs.

Its little wonder the press and media are fixated on Nigel Farage and Reform, the relatively new opportunistic populist party that would win an election with a massive majority, were it to be held tomorrow. (Which it won’t be.)

The success of Reform highlights not the party’s competence to govern, but the rejection of the existing political consensus and parties by the electorate. The declining state of national infrastructure, the collapse in real incomes vs rising inflation, taxes and costs, the failing National Health Service, and the apparent dither at the heart of Whitehall, has all fuelled growing distrust of mainstream politics – giving Farage (who seems a very likeable and relatable fellow) the populist opening to dominate politics. He’s played a blinder at dominating the narrative and setting the agenda to undermine government – using the MAGA playbook.

But it won’t be good politics. A party with no real tried and tested policies, few experienced and non-conflicted political operatives, and a platform built around single issues – today it is immigration, before that Farage rose to prominence on his long-term campaign against Europe that culminated in Brexit – is not going to provide immediate solutions to the long-term ills that beset the UK.

The good news is the picture of Broken Britain that dominates the headlines is a massive over-exaggeration. Much is in need of repair, but much of what makes the nation work is not unfixable and much of it – like the Gilts market – works rather well. But if you were a global investor – what does the outlook for the UK look like?

My little dog, Dinner Jacket, (Dee-jay to ourselves), loves Nigel Farage. He was given the choice of a Donald Trump or a Nigel Farage dog-toy at the weekend. He chose Nigel, and within moments had bitten off his head to extract the squeaker – the prime objective of any Cockapoo when faced with anything new. It caused great hilarity, except for one of my Reform-supporting chums who reckons Deejay might be a closet Tory.

Out of time and back to the day job…

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital

NB – apologies for the occasional lack of Morning Porridge. She-who-is-Mrs-Blain is laid up with a broken knee and ripped ligaments (sailing accident) meaning I am demoted from Husband to dogsbody. I now know what a washing machine is, and what a vacuum cleaner does. I am also learning all the short-cuts to the local hospital and how to operate the medical equipment (a Breg ice and compression thingy to get the swelling down, and a Tens machine. Later today we’re off to get a wheelchair.) She is improving, and smiling… but I’m exhausted!