Blain’s Morning Porridge June 16^th, 2026 – Boom before the Reality Sinks In

“Sometimes I’ve believed six impossible things before breakfast”

Stock Markets partied higher yesterday, utterly unbothered by the optics of the Iran Deal. Bond markets look at the long-term risks – wondering what the consequences of the Iran war might trigger in the coming years when today’s new bonds are set to repay. Traders will be trying to figure out what a new world will look like, and just how sustainable US Bonds markets might be as the global economy shifts.

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I think I have used the classic Alice in Wonderland (actually, it’s from Through the Looking Glass) quote more times than any other over the nearly 20 years I’ve been writing the Porridge.

It feels kind of apt this morning.

Yesterday Global Stock markets hit record levels, rallying on the back of the Iran deal. However, we all know (even though many aren’t prepared to accept it as the actuality) that the deal represents a definitional defeat of the USA by Global Terrorist Central – Iran. Don’t take my word for it – read the editorial in the New York Times: President Trump Lost This War.

Iran won an asymmetric war versus the strongest Military Nation on Earth – knowing Trump would not put the boots on the ground that would be needed to win it. There are lots of lessons the Chinese, Russians and NATO will be absorbing. Resilience is the new watchword.

Yet, markets aren’t paying much attention. Stocks typically run on singularly short-term perspectives. Because they are the weighted sum of what every single market participant thinks at any given moment in time, they seldom concern themselves with the long-term cycles of history, but with the immediate here and now. And the immediate outlook for stocks looks bullish. Buy, buy, buy…

The here and now of what’s driving today’s market includes the left-over, un-invested liquidity from the SpaceX IPO, the resolution of the war (who cares how), the AI everything boom, and the underlying strength of the US economy. The equity market consensus is that’s going to carry everything higher. A rising tide of confidence lifting all boats and that kind of stuff.

Of course, there are naysayers! The bond markets aren’t so happy. The Fed Meeting will confirm a shift towards tightening through 2026 on the back of economic strength and the inflation shock of Hormuz still working through the economy. A fair number of clients now expect up to 3 hikes through the current Fed cycle before rates can ease next year.  I can just picture new Fed Head Kevin explaining why he agreed to hike rates to The President – that would be a fun discussion to watch. Sell, sell, sell.

A few bond market heads are rising above the parapet worrying about the sustainability of the US bond markets if rates rise, the USA loses its exorbitant dollar privilege, the US$ becomes less critical to the global economy, and nations stop buying Treasuries and start stockpiling commodities instead. That’s one lesson of the war: just-in-time supply theory being replaced by just-in-case stockpiling of strategic resources.  (A good example is how the blocking of the Straits of Hormuz stifled the supply of fertiliser – which will impact the global economy later this year as Harvests come in.)

Until recently we didn’t really concern ourselves fretting over the long-term. Markets considered it a given that global wealth, increasing prosperity, new technology and the political stability of the West meant the real issue to benefit from the joys of long-term investment, and compounding bond yields, was picking the right sectors to invest in, and having the confidence in the bond markets to repay principal and interest in a timely manner. We all believed nothing would really change – certainly not sustained energy and price shocks or geopolitical shocks.

The thing is mistakes have consequences. History is littered with examples of how even smallish errors can cause monumental shifts in the future path of economies.

Now the world is changing fast. And we might miss it until it slaps right in the face. 20 years ago, even 10-years ago, we were all certain the coming decades would likely look a better version of today as the global economy grow and continued to innovate the next new, new thing.

But ask that question of yourself today and tell me that your future vision of the world is still for same as, same as. Tough. Isn’t it?

There is a rising sense the next decade could see massive global shifts including in money patterns, (and that’s without bringing in the very real risks of climate change, like the Super El-Nino kicking off in the Eastern Pacific.)

If you want to fathom what the world will look like in 10-year’s time… well that really is a difficult question. How the USA has been humbled by Iran highlights how the tectonic stability of everything we believed in is beginning to rumble and shift. There are now multiple economic and societal issues roiling and clouding our perceptions of the future.

Not the least of these is the question of whether the USA will remain the dominant global economy. We’re in a period of hegemonic challenge – with China aiming to be the top trading nation, economic and military power. (I suspect the stated intent of seizing Taiwan may be bluff – if they can win it by economic means, that would be a better outcome.)

The last 18 months of Donald Trump certainly hasn’t endeared the Rest of the World to remaining wedded to US Soft, Economic and Military Power – the rudeness, the threats, unravelling Nato, the tariffs, and now the global recession risk he triggers from his stupid Iran War. Trump has made America look weak and ugly. He has severely tested the globe’s confidence in the USA. No one will be fooling themselves that the USA won a great victory.

The “deal” is just an MoU and could still fracture. But Trump needs it to be out the way before the Midterms. He will do his best to make it work – whatever it eventually emerges as. That is risky – Iran no doubt understands the strength of their hand, but the risk is don’t know when to take the win – something leaves Trump looking like he got some kind of result. (It is all smoke and mirrors.) What the world will see is a new Gulf reality where Iran is actually more powerful than in February this year with de-facto control of the Straits through an agreement enshrined in the eventual treaty and the end of sanctions. Any nuclear deal takes us back to where we’ve been before.

And will the Middle East be any more secure? The big risk is Israel – that Netanyahu will deliberately seek to destabilise any agreement through attacks on Iran interests in Lebanon and the West Bank to ensure Iran remains isolated. Iran will be seeking to make sure any reproachment between Israel and the Gulf States does not happen.

And even as we watch America wobble, the whole edifice of the West is under pressure.  Increasingly its clear the West is being tested by deliberate destabilisation and manipulation of the news on social media, fake news, disinformation, cyber and hack attacks.

We ask the difficult questions – like why is the Western World unravelling? What caused the consensus politics of the “social democratic” boom to deteriorate into the polarised conflict that characterises the World today? When did politicians stop leading nations forwards, allowing bureaucrats to manage decline? How did we lose sight of growth policies and ideas? Why are wokery, environmental and inclusion politics seemingly more important that a sustainable secure society? Why do Western nations seem so incapable of fixing anything – which is what’s driven the remorseless rise of populist right (and now the even more populist left.)

We are drowning in questions, lacking solutions, and left wondering where did it all go wrong?

My fear is we’re going to find out before we are ready for it…

Out of time and back to the day job…

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

Meanwhile, don’t forget about my new book:

The Battle For Hamble is a proper grown-up examination of how bureaucracy has failed: a tale of Greedy Corporates, Bad Planning and Economic Illiteracy. It explains how a wholly unnecessary Gravel Quarry will be dug in middle of a prosperous village – putting 6000 jobs at risk. The truth is no one wants gravel, and the quarry company understands it’s not what you dig out, but what you stuff back into a hole in the ground that matters. Gravel sells for £30 a tonne – Landfill earns £150 a tonne to bury. Go figure.