By Michael Every of Rabobank
As Axios puts it, ‘Wall Street's playbook for 2026 already needs to be rewritten’. Many players’ do.
Gold is through $5,000 and silver up 5.5% at over $109 – it was even higher intraday. You might not trade either, and I remain sceptical that we are moving back to a gold or silver standard, even for limited international trade. Yet besides the notable industrial implications from silver (and copper), this is hoarding, and a vote of no confidence in the entire global financial architecture. Wall Street is calling it “the Debasement Trade.’ That fails to see that, in time, it can lead to Wall Street being put in a basement, or up against a wall. Plenty to think about there.
The IMF head warned the world to ‘Wall Street Is Fixated on a Possible Yen Intervention.’ After all, Japanese CPI is 2.1%, 30-year yields are 3.66%, the BOJ can’t do too much because public debt is so high, the country has run five annual trade deficits in a row, removing its protective shield, and a weak JPY isn’t helping, just feeding inflation. Some see Japan needing a US bailout before these JGB problems flow back to US Treasuries… even as markets are wondering who is going to bail the US out.
There, note that, the US is breaking the global architecture to bail itself out. That starts with geopolitics and geoeconomics, then flows back to markets:
PM Takaichi just underlined National Defence Strategy makes clear South Korea, as others, is expected to do far more for its own defense under the US umbrella: but the implication could be that umbrellas can be closed if those under them don’t contribute to holding tightly against strong geopolitical winds.
On which, Europe can’t defend itself without the US, and “The EU should stop dreaming of creating a European pillar for NATO and continue to build ties with the US despite Trump.” The New York Times adds, ‘So, what is the ultimate EU decision to be?
UK PM Starmer stated behind closed doors, ministers have pushed for closer economic collaboration with Beijing for a year, even as they signed a US deal that runs the other way - and as it’s reported that it can expect to be next to be told to make a choice and to spend at least 3.5% of GDP on defence.
Meanwhile, as middle powers talk about propping up the liberal world order without the US, the USS Lincoln Carrier Strike Group has arrived in Middle East, showing what real power is. On one hand, Trump says ‘Iran wants to make a deal,’ yet we may see US strikes against regime targets to trigger new mass protests, and there are suggestions it may impose a Venezuela-style blockade on Iranian oil exports – the kind of upstream disruption of commodity supply chains to China we flagged last year as a trump card vs. Beijing’s control of rare earths (where Japan-China tensions are Record number of people in UK live in ‘very deep poverty’, analysis shows’; ‘Carney unveils hike to GST credit, other measures targeting affordability.’ Moreover, ‘The Wait List for a Birkin or Rolex Is Getting Shorter’ says the WSJ, while “Falling resale values show that even makers of the world’s most popular luxury goods are feeling a slowdown.” Oh, the humanity!
In short, expect domestic politics to stay as ‘interesting’ as geopolitics – and the two are inextricably linked. Indeed, even as Trump appears to be taking a more conciliatory stance over ICE in Minnesota for now, hedge fund star Ray Dalio warns of ‘Indonesian President Prabowo's nephew is now a step closer to securing a position as Bank Indonesia’s Deputy Governor. Yes, playbooks are being rewritten – with some very old plays.