As is required whenever addressing the types of topics I will address, I must start this newsletter with a wholly true, yet necessary disclaimer:
War is unshakeably, irrefutably, and horrifically bad.
Now, you may think that's completely obvious, and I've gone far too OTT in a bid to claim my innocence, but – in a world filled with Creedence-Clearwater-obsessed global leaders – it's important that truism is, once again, stated outright.
A new awakening in President Trump
The past month / month-and-a-half has seen a new awakening in President Trump's character. Here's my theory: fresh off the heels of Venezuela, Melania, Donald, and Barron clearly went through a phase of watching far too many Vietnam War-era movies.
Apocalypse Now, Full Metal Jacket, nay, even Forrest Gump. With Creedence blaring and the idea of the smell of napalm clearly stoking some chest-beating feelings, President Trump (along with others, let's not scapegoat entirely!) helped lead the global economy into one of its biggest crises since COVID.
A major, long, and ceasefire-immune conflict with Iran.
How markets have reacted so far
As is customary given my professional position in financial services (PR), it's important to go through the market impact – although for my press-beleaguered readership, you may already be able to list these off yourself.
Equity markets (globally) dropped. Bond yields (by that, I especially mean US Treasuries) shot up. Bitcoin's woes deepened. And of course, that is all amid ECB Chief Christine Lagarde warning that participants are underpricing the tensions (I would have to agree with her – see my bearish outlook in City AM).
Cracks in the resilient US economy
On the other hand, macroeconomically speaking, we continue to err on the precipice of real crisis. The US economy is case in point. Although defiantly resilient – 178,000 jobs were added to a warm-ish labour market last month – cracks are beginning to show in even the biggest fish. US CPI shot up +3.3% YoY, with the energy index jumping +12.5% YoY.
While the US's buoyant optimism may just keep its markets afloat – although a far cry from its bullish norm – elsewhere across the globe, numbers like these all signal a stark truth: a recession may be near.
The stagflationary PSI is off the scale, and we're all sitting ducks to the upcoming economic fallout.
Indeed, that is especially true for two reasons: the first, when considering the historical macro impact of a global oil crisis, vis-à-vis the inflationary ramifications of the 1970s Oil Embargo; the second, because of the already vulnerable state many of our world's great economies find themselves in.
Why the UK and Europe look exposed
In the UK, inflation has only just got under control, with the health of our private sector hanging in the balance – and like our European neighbours, whose defence listings and 'ABUSA' will not be enough to stave off such pressures, we're facing oil supply tightening on two fronts, with Russia-Ukraine still ongoing.
The point is that the stagflationary PSI is off the scale, and we're all sitting ducks to the upcoming economic fallout – that is, if this fragile ceasefire doesn't quickly heal.
And while I know this newsletter is usually reserved for finding the lighter side in global, economic, and financial affairs, with such pressures building, we must all take a look in the mirror and be honest with ourselves:
We Ain't No Fortunate Sons.
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