Week signals: The truth of uncertainty
Plus: watch points for the EU, the US, Poland, France, Myanmar, and Venezuela.
This week:
IN REVIEW. Long-dated spikes, long-tailed risks, and using the longue durée.
UP AHEAD. EU tariffs, Poland’s election, Macron’s Asian tour, Myanmar’s reckoning, and Venezuela’s extend-and-pretend.
Week Signals is the Saturday note for clients of Geopolitical Strategy, also available to GD Professional subscribers on Geopolitical Dispatch. Click here to learn more.
The Week in Review: Sting in the tail
The week began with the threat of unilateral tariffs by post on "150 countries". It ended with the announcement of unilateral tariffs on the EU and Apple. Elections in Bucharest, a summit in London, a resignation in Tokyo, a dressing-down in Washington – even a ban on international students at Harvard – receded to the background.
After a relatively quiet May, April's trade wars are returning as we head to June. The market's fear gauge, the VIX, is rising again, as are the yields on long-dated bonds. And more than trade uncertainty, investors are worried about the limits of government spending, and not only in the US. Fiscal recklessness is driving concerns that quantitative easing may be reintroduced to soak it all up (perhaps one reason why stocks have held despite the bond market's "sell America" narrative). This, in turn, is reviving fears of inflation, if not stagflation. At least the Federal Reserve's independence is no longer in doubt.
Uncertainty is back at a post-Covid maximum. The White House and the executive branch appear unhinged from custom and convention. Populism, while not on the same rapid trajectory as in 2024, is now a feature, not a bug, of governments around the world. International cooperation is declining. The US is boycotting the forum, the G20, that saved the global economy in 2008. More venerable institutions, from the UN to the WTO, look even less loved.
In this environment, the market is putting a premium on tail risks. More people (not just you) are looking beyond the typical news cycle for geopolitical and unconventional warnings. And with the fundamentals of our economic and political system being questioned as a multipolar world emerges, gold and even bitcoin look more attractive than sovereign fiat, even of the investment-grade variety.
So in a world of long-term uncertainty, long-duration jitters and long-tail “Black Swans” (or fat tails, to use another term from the populariser of the concept), where do we turn for certainty? History, of course. As Churchill once said during another period of extreme uncertainty, March 1944, "the longer you can look back, the farther you can look forward".