The markets are on a tear convinced normalisation is around the next corner. Yet they ignore the reality the Iran war has done significant damage to the global outlook – even if Tehran and Washington kiss and make up tomorrow. I don’t claim to understand the madness of markets and their ability to keep fooling themselves, but I do follow economic history and how events change outcomes.

Damn the torpedoes! Full steam ahead. The recent 10-year Gilt auction was a screaming success. There is plenty of demand at the right yield – 5% for 10 years! The cost of servicing debt is high, but to create growth the government needs to fix the economy by borrowing more. Global investors know that when assessing the UK’s yield premium. The UK would do better to borrow more rather than less!

Global disruption – how likely is it to end quickly? Trump’s objective was to install a regime that will do his bidding in Iran. The appointment of Khamenei v2.0, the lack of a clear opposition, or defectors, makes a swift closure increasingly less likely. Global markets are pricing for a long, destabilising war with rising inflationary and geopolitical volatility.

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.

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.

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.

The UK survived yesterday’s Pretend and Extend budget. It was a lacklustre soap-opera moment. It won’t cure the UK’s long-term issues or fix Broken Britain. If politicians were serious about repairing the political economy of the UK – it’s time for root and branch surgery on the “frictions” that leave the nation suffering Economic Dementia!

There is nothing like a Trump tweet to set the tone for the week. Feels like the markets are living on borrowed time re AI, US Treasuries and current valuations. All look strong, but what if the bottom falls out? Relax… the sun will come up tomorrow.

 There is no stopping a market believing what it wants to believe. Tariffs, Trade Wars, Credit Cockroaches, BTC delusions, this market has it all, yet everyone is still dancing. Best thing to do might be to “Catflap” – walking away without saying anything to anyone.

The World shifted over the weekend. Trump’s 100% China Tariff threat was a snap reaction to the reality is China is now the key power in global trade, and holds most of the cards. There are significant risks ahead, not the least being the AI bubble popping – which would kill US sentiment as the whole stock market edifice will trumble.