The Chinese curse about living in “interesting times” is a boon to anyone fascinated by markets. There is no shortage of excitement coming our way next year – everything from conflict threats, renewed inflation, the return of QE, to the Space X IPO. But the thing is… we really don’t know….. we never have!

Y’day we had yet another Judder Moment for markets as the Fed surrendered to Trump and prepares to juice the markets with renewed QE. Have we learnt nothing? No, I guess we have not. Pretend and keep pretending as we enter the Potemkin Economy era. This will not end well.

There is a lot of noise in Gilts these days. The danger is it derails national confidence – even though much of the clamour is twaddle. The reality is all Governments face challenges, but the UK’s Gilts market is much stronger and more resilient that the right-wing press would care to admit.

Markets feel increasingly nervous. Although someone has cranked up the party music to 11, and the euphoria is still pouring, concerns about banking and loan exposures are rising. If there is a wobble, then it’s likely to be leverage on leverage that sees a bunch of private credit lenders in trouble.

Earlier this week the US Fed eased interest rates under pressure from President Trump. There are host of confusing signals around employment and price stability, but the Fed jumped anyway. The bond market sold-off – a polite growl that was just enough to warn it’s not happy about political interference and potential policy mistakes. When it barks.. it will be for good reason.

You might think China planned it this way. As it challenges the USA as global hegemon, there is panic across the West as Western Long Bond Yields hit record levels. It smells like crisis – In Bond Yields there is Truth – but you have to know how to read the market. Long bonds are weak because of inflation. Be concerned, but not fearful. Buy the short-end – cuts are coming!

The Fed has fallen. What will negative real yields do the US economy? It will likely further fuel asset speculation and lead to renewed QE as global buyers exit the US bond market. Using inflation to wipe the budget deficit may even be part of the plan. The path ahead looks increasingly fraught. Been here before.

While Trump fumes at Jay Powell for not slashing rates, Scott Bessent is the adult-in-the-room minding the Fed isn’t too battered by the President’s harangues. No doubt they chat about the structure of the market and the rising risks to it – including stablecoins.

Powell was sacked and then he wasn’t. The market tumbled but swiftly bounced. It was another day of training markets for disruption. The reality is the ongoing shenanigans are undermining confidence in the Fed ahead of what could be a very testing time for the US economy when Trump policies start to bite.

Donald Trump’s BBC interview was… “surprising”. It was Trump, but elegiac? It won’t change the economic reality. The market is living in today – assuming the consequences of Trump policies will be limited. If they hit hard – which economy will suffer most? The USA or the UK?