This video, from my current favourite English economic commentator, may well interest you over a coffee break.
Economics
Deep Dive – August 2025
Introduction – European Focus
This month’s longer post is dedicated to the outlook for European (including the UK) markets for the rest of the year, based partly on the Morningstar webinar presented a couple of weeks back, from which I have extracted and in some cases further interpreted or extrapolated, my own selection of important pointers and data.
Note that the presentation was delivered just before Trump’s threat of 30% tariffs on the EU if a trade deal had not been struck by the end of July. As I wrote this piece, an outline deal had been announced, with a general tariff set at 15% but various significant issues still outstanding.
The main webinar presenter , Michael Field, Chief Equity Strategist at Morningstar Europe, did (in mid July) make the point that a ‘blow up’ in trade relations with the USA was a distinct possibility! I think the outline deal that we know about as I write this piece is being taken, or at least presented, differently in the various major European states, but perhaps the provisional outcome is not so much a ‘blow up’ as a potential set of hurdles that will impact trade in ways yet to be fully understood, possibly only temporarily.
The Main Points
YAP – (Almost) nobody expects the unexpected!
The chief ‘weapons’ of a stock market correction are surprise, or fear and surprise, or …. (please carry on based on your familarity with Monty Python).
I should say that a logically predictable inflection point in the normal market cycle that can be anticipated is clearly not a surprise to the well informed (for example October 2021) but a ‘crash’, such as in October 1987 or the onset of the great financial crisis of 2008 will be unexpected by many market participants and that is the very reason that it progresses to become a severe valuation reset that may go on for as long a several years. In simple terms, there is panic.
‘The Impact of the Highly Improbable’ is a now legendary book by Nassim Taleb that formalised the Black Swan theory, essentially the idea that outlying events, or those deviating from common and current experience may have a disproportionate impact on perception and in consequence reactive behaviour.
The idea is not that black swans are unknown (apparently, they were known about by the Romans) but that in regions where white swans are seen daily in numbers, suddenly seeing a black swan comes as a shock and is almost never anticipated (because how could you?).
YAP – Trump and Europe (with 30% tariffs)
Given my obvious relative enthusiasm for investing in Europe relative to the USA, readers may be wondering if I would now take a different view after Trump’s most recent announcement of a 30% tariff on what I think is meant to be the EU trading block.
Deep Dive – July 2025
Half time scores
We are now at the end of the first 6 months 0f 2025 and more significantly, a little under that much into Trump 2.0. What has been the actual impact of the orange one’s political and economic ‘policies’’ on markets? To what extent have our advance calls on the widely anticipated instability and general weirdness that followed the election of Donald J Trump protected our portfolios or better still, left us exposed to new opportunities?
YAP – Dirty old men
We are currently living through one of those periods when geo-political risk is far and away the factor most likely to influence our financial well-being.
It is generally true that markets are not the economy and vice-versa and economic principals at a high level are somewhat insulated from political shenanigans, but at the moment we have a US president whose policies are so disturbing to investors that the US Dollar is under considerable pressure, which is definitely a relevant ‘macro’ issue for investors, and we have the war in Ukraine driving a sea change in military spending in Europe and the war in the Middle East (when is there not a war in the Middle East?) pushing up oil prices, both wars being factors investors need to count as relevant,
Thinking through the ultimate drivers of the rather disturbing global geo-political scenario, with the aim of predicting how much worse things will get before they get better (by better, I mean more predicable and stable), one cannot avoid thinking: Trump, Putin, Netanjahu, Khameinei. Today’s Guardian newspaper has a cartoon featuring these characters under the heading ‘Country for Old Men’, playing on the Coen brothers’ film of that name, based on Cormac McCarthy’s novel. I understand that the film revolves around money, is extremely violent and many innocent bystanders get killed. The protaganists are utterly ruthless and without symapathy. So the cartoonist’s satire seems highly appropriate.