Blain’s Morning Porridge January 19^th, 2026 – And now for something completely different

“Your actions will lead to the fall of a great empire” (sotto voce “your own”.)

Rising risks, geopolitical positioning, conflict, and strategic compression will be the themes for coming decade. Who will rise, who will fall? What are the implications for markets. Do not expect easy answers. This is unlikely to play out as anyone predicts.

Link to Podcast

That was an interesting weekend.

What will it mean for markets? Would you be a buyer of Long French bonds this morning? Where go Euro and Sterling from here? What will be the consequences on American Tech? Who will fund the US deficit now? How much gold is not enough?

(As Europe is spurned by America, Emperor Xi and Tzar Putin must be laughing their heads off. Trump’s great chums Peter Thiel, JD Vance, Palmer Luckey, and many other American billionaires, are great fans of JRR Tolkien’s Lord of the Rings. I wonder if they see any parallels between the fall of Númenor and the present day. Asking for a friend.)

Who would have guessed the Capitalist Age would end over Greenland?

Oh well… stranger things have happened – and every event has consequences. In 1898 World War 1 nearly kicked off early when France and UK faced off at Fashoda on the upper reaches of the River Nile. They eventually agreed a stronger alliance, which ultimately unravelled the British Empire in the Great War! When you set the wheels of geopolitics in motion – who knows how they will play out.

Any lingering doubts on just how significantly the global world order has changed were brutally crushed. According to polls in the US press, most Americans are horrified at what their president and his cronies have said and done – but Europe now knows the USA is no longer an ally or friend. It is done. The divorce is happening. Trump’s signal to Europe – give me what I crave, or I will crush your economies – confirms we face a turbulent decade.

Get ready for what comes next – it will be completely different: It will be a decade of increasing conflict risk, strategic opportunities, and most dangerous of all, strategic compression, all of which will magnify volatility as the new world emerges. (Don’t panic – breathe deep and remember Mantra No 2: “Things are never as bad as we fear, but seldom as good as we hope”.)

There was much in the weekend press about how Trump’s goal is to carve up the world into three power blocks: America, China and Russia – hence his appeasement of Xi and Putin – but that’s fundamentally a mistake. Russia is not a great economic or military power – it’s a client state of China, dependent on China’s largesse just as Europe is/was to the USA.

The real issue, the real powerplay of the coming decade, will be what becomes of Europe. The USA wants nothing to do with us. Get past Trump’s propaganda about our civilisation being in decline – Europe is rich and wealthy… but its somnambulant, riddled in bureaucracy and wokery, in perma-stagnation, and lazy after 80 years under the US umbrella.

What do the Chinese have in mind for us? Maybe keeping us distracted through the threat of a strong and aggressive Russia? But that’s a risk if Europe wakes up, uses its sleeping abilities to defeat the Bear, and emerges as something reborn and determined. It could happen. China may decide placating Europe and tying it economically is a preferable outcome – it’s one I can see European leaders being happier to embrace because it would be easier.

Who knows…

Today, Europe is the visible loser from the Trump divorce. Aside from flashed anger and vague hints about retaliatory tariffs, there is little Europe can do in the face of Trump’s threats – more fool Europe for trying to please a capricious mobster bully. Europe is ill prepared for the coming economic stress and conflict. The issues are all to visible.

It will take at least a decade to build new European security in the absence of the US umbrella. The UK is most affected; it considered itself a bulwark of European defence – Airstrip 1, but is now hopelessly compromised by its closeness to the Pentagon, and reliance of US weapons systems which defacto rely of Washington’s approval to use.

European efforts to act as polity remain riven by self-interest – 27 nations and multiple tribes that have spent 3 millennia in conflict still show little desire to act collectively, unless someone else is paying. (It’s well to remember the UK financed Europe to coalesce against France throughout the 18^th century and again against Napoleon in the 19^th.)

How resentful will other European nations be if an (unlikely sounding) Polish/German leadership of Europe’s security was to emerge – and they were expected to pay for it. (That sounds not a bad idea.) Who will persuade Spain and Ireland to pay their share, and what if they do not? Maybe time for a new Northern Europe? And the UK will have to get real about its role as part of the solution.

Perhaps the break with the USA will be the shock Europe needs to rebuild, rearm and become the third global power block. But that ignores basic lessons of history. Some nations thrive under great pressure – as the UK did in the Second World War. Some fail – as did internally riven, politically divided and economically exhausted France in 1940. These are questions of unity, morale and intent – are nations prepared to fight or flight?

The current outlook for Europe, where a fifth column of right-wing political populism seems set to destabilise all the great European powers, is not encouraging. You would almost have thought the Russians had planned it that way. Maybe they just got lucky – but “luck” is seldom unaccompanied by great effort and clandestine planning.

Or will Europe take the easy way out, and try to reach an accommodation with China – offering to open up European markets in return for China playing the role of global policeman and thwarting further Russian aggression? Trade is always a good thing – when it works to everyone’s advantage.

Or could Europe actually triumph? Another lesson from history is the efficiency of nations. Europe is currently struggling because it has spawned an immense bureaucracy that sucks out growth and innovation. However, autocratic dictatorships tend to succumb to poor resource allocation (witness Nazi Germany and Soviet Russia) and become victim to the costs of corruption. Demographics will also be in play – can China’s automation of its economy compensate for its unbalanced rapidly aging population? Can Europe stay rich as it grows old, and will rising migration from the South prove to be an even bigger threat than Trump?

The one thing we can say with certainty – there is unlikely to a dull moment in coming months as the great game of markets adjusts to changing realities.

Lots to think about…

Out of time and back to the day job…

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital

Special Advisor – Spitfire Strategic Capital