Politics still loom large. The U.S. midterm elections likely act as a catalyst for further action by the current administration, particularly around affordability pressures. We expect that the President will campaign as if it were a Presidential race, with renewed efforts aimed at lower oil prices, lower mortgage rates and very visible support for consumers. Importantly, parts of the OBBBA were explicitly back-loaded: tax measures and refund dynamics designed to boost household cash flow this year, alongside corporate incentives intended to pull forward capex – and would anyone be surprised by a Trump signed tariff refund check? As those measures begin to hit, there is scope for a pickup in activity that could be powerful. The key economic question we’d love to grill the new Fed chair on: how sensitive is the economy to lower rates, should they come, and how does that interact with the AI-driven productivity gains we’re surely seeing? (The past couple of months look like yet another step change with agentic workflows) Technological change reshapes what work looks like, many jobs will surely transform and many new industries will get created. Same as it ever was.

The biggest question of the age remains unanswered. It seems clear enough to us from the US side; no longer willing to bear the large cost of absorbing the massive trade surpluses created in China and is reshoring and retooling to deal with it. Europe (via the Draghi report on competitiveness) seems to have woken up. At Christmas I broke the board games out at home. Couple of classics, Hungry Hippos and Risk. The combination of those strikes me as a rough model for the geopolitical environment. Take the marbles out of Hungry Hippos and replace them with the countries from the Risk board. The US and China are both hitting the hippo as hard and as fast as they can to get countries on their side and locked into their sphere of influence for trade, security, manufacturing and energy resources. Venezuela, broader Latin America, the Middle East, Asia, parts of Europe and Russia shifting (and being shifted) into trading and alliance blocs, all with the ability to move markets on short notice. The ball looks to be in China’s court. How this great confrontation plays out is the central theme of the next decade or so, making for an incredibly interesting set of macro opportunities.

2025 has been fascinating to watch through a macro lens. The Trump administration is seeking to reshape policy in ways that will reverberate for years to come. Trading relationships, defense priorities, tariffs, fiscal policy, monetary policy, immigration policy and the regulatory landscape are all on the table. Many of these directly impact the markets in which we operate. Last quarter started in the messiest of fashions, ‘Liberation Day’ setting tariffs based on trade deficits rocked the stock market and was swiftly paused in favor of ‘The Art of the Deal’ over the next few months. Stocks recovered, the contours of deals started to take shape and soon we had the One Big Beautiful Bill signed. Tax cuts were extended and investment tax credits were increased. Deficit arguments abound, most of which read like political talking points dressed up as economics. Are we talking about baselines vs current law or current year? Counting tariff revenue? Are we ascribing a growth multiplier? Our take on the macro aggregate is that deficits are not getting materially and hastily slashed so the accounting identity that public deficits become private profits still holds and growth is OK. Under the surface though there are some big changes in the composition of spending, especially when coupled with the new AI Action Plan. There is a broader discussion to be had on the role of the government in setting industrial policy and picking winners that is best saved for a glass of wine. However, they aren’t kidding calling it a ‘Big’ bill (‘Beautiful’ may be a stretch) but take the time to go through it, the answers to the test are in there. Money for defense and a desire to lead in AI.