Blain’s Morning Porridge May 11^th, 2026 – A tale of 3 Cities, London, DC and Beijing.

“[The sun] rose upon no sadder sight than the man of good abilities and good emotions, incapable of their directed exercise…”

2 choices for markets this week. Worry about where politics are headed in DC and London, and where the Beijing summit will lead us. Or join the AI party, bet everything on the upcoming IPOs, and dance yourself dizzy before someone pulls the plug. Interesting days ahead.

LINK TO PODCAST

Ah, the joy of another Monday morning in the Global Financial Markets! What have we got to look forward to this week? Political fun and games in London, and then how the Xi / Trump summit plays out in Beijing.

But will the market be paying any attention? Probably not when there is so much easy money to be made picking gold off the pavements on AI street. Apparently.

I know, you know, they know, it’s all a bubble, but golden rule of bubbles is get in early. (Rule 2 is get out before the top, but that’s the hard one to call.) At this point I’m underinvested in stocks (still holding Gold) and I’m feeling a bit long and wrong… but who knows what is to follow?

There is much to worry about. The lack of any meaningful signs of progress towards a sustainable Iran solution leaves the Straits of Hormuz closed. That should be focusing attention on the likelihood of global recession on energy costs, the looming jet fuel crisis consequences on global travel, gas shortages in Asia, and the risk (raised in a number of quarters over the weekend) that Trump will decide to threaten Europe for its unwillingness to show support by withholding US LPG supplies.

Let’s start in London.

Gilt yields have proved resoundingly stable after Labour were trounced in the local elections. The bond market has demonstrated it is utterly, completely, and thoroughly disinterested in the political dramas playing out in the sandpit of Westminster politics. The likelihood that the dull, boring, predictable, earnest and utterly ineffective government of Sir Keir Starmer will, at some point in the near-term, be replaced by the likelihood of an equally earnestly ineffective government led by Andy Burnham (as soon as he can be parachuted into a safe, winnable seat) is pretty much nailed on.

Bonds markets don’t care – it will be business as usual. They are betting Labour won’t do much damage. One ineffective government replaced by another. As long as the Bank of England has got inflation in check, and Government isn’t doing anything too stupid… gilt traders won’t be overly stressed.

But in the longer run… that’s when the political premium on Gilts will get more interesting. Now is the time to listen to the developing noise around UK politics – and what it will tell us about what comes next. Nigel Farage’s Reform Party expects to walk the next election. They are new, terribly, terribly excited and terribly, terribly inexperienced. Already, 2 days post-election, they’ve suspended a newly elected councillor for unacceptable racist statements.

Labour was dull – but the market saw them as safe hands. Will they perceive the prospect of Prime Minister Farage in the same way? No doubt Farage will noisily demand a new election when Burnham succeeds to the Labour throne. Reform has great intentions to become the next UK government – but what are their actual policies?

Bear in mind Reform is the successor to Farage’s step-by-step assent into the UK political limelight on the single issue of Europe which has now morphed into immigration. Given what a stunning disaster of undelivered promises and disadvantage Brexit proved to be – what premium or discount would you place on Reform’s ability to guide the UK to the bright sunny uplands of growth? It’s going to higher than the Labour premium.

Taking a look at Farage’s band of fellow travellers – dull maybe, but safe hands definitely not. (Friends who know Farage well say his greatest failing is surrounding himself with bad sycophants.) Some are former Tories who saw the writing on the wall. Some are opportunists. Many have massive issues with Europe. Are they practical and effective politicians, or single-issue resonators?

Who in Reform is going to run the bond market / spending plan optimisation game? What are they going to do to solve the housing crisis – which isn’t about building 1.5 mm executive homes in the next 3 years but about supplying decent social and affordable housing for young people to have housing security and start family formation? Who in Reform will be looking at the welfare budget (which now pays £39 bln (2/3 of the defence budget) on housing benefits? Who in Reform will be making the calls on the NHS, Defence and, yes, the greatest immediate challenge to England since the Armada hove into view – filling potholes?

Reform has clear intent to govern. Over the next three years – how will they persuade the bond market they can?

Meanwhile… China?

This week’s summit between Emperor Xi and King Donald is going to be particularly interesting. I suspect Xi will stick to his very successful policy: “Don’t interrupt while Trump is making mistakes.” Xi will welcome Trump and politely nod his head. Noble sentiments about peace, trade forums and common interest will be expressed at the state banquet on Thursday night, but Trump will come home with nothing in terms of agricultural and aviation trade agreements, or on the renewal of critical rare-earths agreements.

I am prepared to bet good money that Trump offers Xi a guided tour of his new ballroom as Xi takes him round the Temple of Heaven.

Everything is not perfect in the Middle Kingdom – the economic consequences of the housing bust, regional debt and employment raise serious challenges, but Xi knows that a weaker US will enable China to strengthen its grip of global trade not just as manufacturer of everything, but now as a viable alternative producer of high-tech and top end consumer and commercial goods and services.

I am sure Chinese military might will be in the background to the talks – politely remining Trump that China leads the US in several critical areas. As Trump continues to carelessly debase and fracture the long-term defensive alliance that enable the success and prosperity of the “Western” nations during the US tenure as hegemonic global power, China will be eyeing the opportunity to replace the USA as a core trading partner for all these nations. In the meantime, it’s enough for China to keep its client axis of evil; Russian, Iran and North Korea primed.

A couple of interesting days ahead…

Out of time and back to the day job,

Bill Blain

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

Please don’t forget about my new book, The Battle For Hamble. It’s 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.