Hegemon Without Discipline

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Subscribe nowJust as macro traders had settled into the latest cottage industry of becoming temporary experts on AI, hyperscaler capex and the vulnerability of EM services exporters, a much older threat reasserted itself. We pivoted abruptly from the socialisation of cognitive labour to the price of oil, the security of shipping lanes and the familiar tyranny of energy dependence.In the early phase of a shock like this, you can’t get the fundamental playbook out too early. It’s all about positioning. Long EM. Long gold. Short dollar. They made sense, but were crowded. We’re rarely fast and ruthless enough with our favourite trades, and this is another lesson in that.After the initial moves, we began to see the usual higher oil terms of trade dispersion. With what now looks on the charts to be a significant lag, rates markets began to price renewed inflation pressure and tighter policy constraints. Unwinds and old habits produced a dollar bid, but I think it is less convincing on fundamentals. In amongst the pain, the reality is that the issuer of the reserve currency is behaving less like the steward of a system and more like the biggest source of risk within it.At the centre of this mess is an American president who appears too vain, too impatient and too cognitively lazy to absorb even a moderately complex chain of consequences, yet retains enormous power to unleash one. He ignored the most obvious second-order risks around Hormuz, energy infrastructure and oil, then seemed to expect the allies he has spent months insulting to help contain the fallout. On Liberation Day, …