Is a financial crisis coming our way? US Debt, Inflation, Trade, Energy, AI concerns and the rest pushed the revealed wisdom of new Fed Head Kevin Warsh out the limelight last week. Bond yields continue to rise. There are now growing fears of slowdown, or worse. Cheer up! Not the end of the World. But if a financial crisis is coming it will reflect lessons from the past on liquidity, but to solve it we also must acknowledge how much the world has changed since the last one in 2008. This time it will be different!

Western economies succeed because bond and stock markets work together. Bond markets enable governments to finance the optimal conditions for invention and innovation, enabling growth and prosperity. Sometimes Markets fall out of line, while Politics are ruled by votes rather than experience – and that’s where the wobbles start to multiply.

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.

The global economy is inevitably slowing from the deepening Hormuz oil shock. The Americans intend to press on despite the rising costs. While the global economy burns, President Trump is mulling multiple plans to achieve his version of victory. The rest of the World is waking to the reality this war is damaging their economic interests, and wondering how to mitigate the effects.

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.

 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.

The Gaza deal is an extraordinary win for President Trump. Banging heads together worked – and may have created conditions for the Middle East to move towards reconciliation. But, we had another “judder” moment as the trade conflict he triggered with China threatens to overturn the USA’s economic resilience.