Does the steepness of the US yield curve tell us the US Economy is about to boom, or inflation is about to sink the Treasury markets? To figure out which, you need to interrogate the witnesses and look at what the evidence is telling us.
Markets aren’t much concerned about Iran. US Military might is expected to prevail, cowing the Ayatollahs into acceptance of Trump’s maximalist demands. What could possibly go wrong? Trump is no student of history, and may not understand the gamut of military, logistical and geopolitical risks aligned against him.
Sometimes you just have to laugh. The Tariff Judgement against Trump raises elevated Chaotic Tantrum risks in Treasuries, while markets fear what wobbles in private credit might conceal. Everything in markets are connected – when something cracks in credit, someone somewhere else will start screaming!
The difference between successful democratic economies and autocracy is that the rule of law works better. Autocracies trend towards corruption and inefficiency. Insider dealing and corruption is a fact of the financial markets – punishing it is a matter of the enforcement of justice and the willingness to do so. Europe is acting over Epstein. What’s happening in the USA?
Sometimes you have to laugh. Tariffs have been the cornerstone of Trump’s economic miracle, allowing him to deflect, discombobulate and distract voters from economic truths. Now the NY Fed says tariffs are a consumption tax – even MAGA voters will be worried as the Mid-Terms approach.
The Russians have captured the FT, apparently! The headline that Gilts are about to crash because the Government will borrow more to increase defence spending is Pravda 101. The reality is Gilts should rally on increasing the strategic deterrence that defence spending will create.
The future will be set not just by the defence and deterrence discussions last weekend in Munich, but by how global markets react to competition. New Chinese AI drops from DeepSeek and Qwen may challenge US hyperscalers and challenge expectations of global demand and markets.
The world may be going to hell in a handbasket, and tomorrow is the start of the Year of the Fire-Horse (the most volatile of the 60-year Chinese zodiac cycle) but what a fantastic weekend of sports we just had. It’s all positive stuff… Let’s enjoy it while we can.
There are times when the course of history takes on a momentum of its own, most often in periods of conflict around hegemonic change – as exist today. This year’s Munich Security Conference will address stressed and fractured global alliances – while markets should be figuring out how conflict risks have risen and potential outcomes worsened.
Did someone say Century Bond? What’s not to like about the bond market? Rates are going to fall! Everyone wants to buy credit (at historically tight spreads) and the biggest most successful firms on the planet are paying 70 cents over Treasuries for your money! What could possibly go wrong?
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