Will markets ever care about anything?

At PGM, we actively manage risk today while targeting outperformance tomorrow.

So no matter what investment risks concern you most, from geopolitics to inflation to liquidity, PGEM brings disciplined risk management expertise that spans 30 market cycles.

Our active approach finds opportunities and volatility, helping our clients to navigate risk and achieve their long-term goals.

PGEM, our investments shape tomorrow today.

Pushkin

Geopolitics are getting more and more personal.

You want a decent trading and diplomatic relationship with the USA?

Well then, you better get along nicely with the big man, Donald Trump.

Not his underlings, not his outriders, but the man himself.

The same goes for big business.

Suddenly, the president is very publicly receiving shiny gifts and promises of big payments to the federal government from companies that want to stay on his side.

This all feels rather unfamiliar for that shining city on the hill, the home of capitalism itself, the USA.

And it means that it really pays to understand what Trumpism really is.

Now then, Rob Armstrong and I, we know what we don't know.

So today on the show, a treat.

A geopolitical pointyhead who actually understands how the world works, I hope.

This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin.

I'm Katie Martin, a markets columnist and mere mortal at the FT in Sunshiny London.

And I'm joined, first of all, by normal man Rob Armstrong from the Unhedged newsletter in New York City.

Rob, say hello.

I'm so excited that Gideon is here.

If he doesn't know it, it can't be known.

Thanks for the heavy sarcasm, Rob.

Fucking go.

It's true, man.

Politics is a mystery to me, and I'm glad you're here to help.

Well, that's it, listener.

We've found you someone who really knows their geopolitics.

Thunderous FT World Affairs commentator and pointy head, Gideon Rackman.

My head's obviously not literally pointy.

In fact, I think I would say I'm surprisingly lowbrow, but I will try to be pointy-headed

in principle.

Raise the tone.

Okay, I'm going to raise the tone.

Raise the tone.

Now then, how often do people ask you what the guiding principles of Trumpism really are?

And are you any closer to an answer?

Well, actually, they ask me surprisingly rarely, or they don't put it quite that way.

It's more like, what the hell is going on?

You know, because Trumpism is such a blizzard of apparently kind of unconnected stuff.

I've almost decided I've got to keep a list of the things he does because there's so many.

But I mean, if I had to answer that question, what would I say?

I think it's a lot of of it is vague instinct of Trump, which is why it's so hard to turn into a coherent ideology.

You can say there are things that appeal to him.

He likes tariffs.

He likes other strongman leaders.

He likes,

you know, Xi.

He likes Putin.

He likes kind of macho leaders who are perfectly democratic, like Alexander Stubb, president of Finland, who plays golf very nicely.

So there's kind of personalized stuff.

And I think he also, he likes things that make him look good.

And he's almost sort of childly open in wanting certain things, like the Nobel Peace Prize, which you know, most people might think it's kind of faintly ridiculous.

And even if you sort of lie awake at night thinking, it'd be really cool if I got the Nobel Peace Prize.

You don't like say it every other day.

But no, he's driven by ego and he's driven by instincts.

And I think that's sort of it.

Yeah.

I can't agree more completely with that.

The question I always ask myself about this guy is, what is the thing

for which he would make a sacrifice of personal or political

or media capital for what is Trump willing to absorb pain?

And I still don't have an answer to that question.

Well, I think that's almost a principle for him.

that he thinks there's nothing worth making a sacrifice for.

I mean, he disputes having said it, but famously he has meant to have called the American soldiers who were killed, I think, at D-Day, suckers.

You know, he said,

why would I have visited their cemetery?

Trumpism, on that reading, can be summed up as, don't be a sucker.

Don't be a sucker.

But look, so we can point to a few countries where we can see this very, I'm going to say, mercurial approach really play out.

So, for example,

Pakistan he seems to get along with quite famously.

Pakistan's very good at flattering Trump, saying he should get the Nobel Peace Prize, yada yada.

Whereas he's really taken umbrage at countries, including Brazil, India, and of all people, Switzerland.

The Swiss go out of their way not to annoy people, but they have annoyed Donald Trump.

Yeah, I think they're a bit astonished by that.

I mean, Brazil is obviously easier to explain because he's very matey with President Bolsonaro, former President Bolsonaro, who is accused of having failed to accept losing a presidential election and then encouraging his followers to storm the Congress and is on trial for that.

And something about that really annoys Trump, the idea that this guy would go on trial for that.

So you can see that he's going after Brazil for that.

That I can explain.

Switzerland, I mean, I suppose he wouldn't be the first person to find the Swiss sort of annoyingly smug, but I think that it's more that the Swiss are just not able to deal in a sort of way that General Munir of Pakistan is able to show up at the White House and say, okay, what kind of a deal do you want?

Sure, I'll nominate you for the Nobel Peace Prize.

And, you know, Witkoff's son is doing crypto deals with us and, in fact, came to see me.

It's all very personalized.

It's not very rule-based.

Switzerland is almost internally the most democratic country in the world.

Everything's put to a referendum.

There are loads of cantons.

It's very, very law-abiding, as you would hope you would.

you would want for a big financial center.

And so it's hard for them to say, just turn up and say, sure, what do you want?

We can do that.

As a result, Swiss tariff, I believe a right in saying 39%.

There is a kind of hatred of process just for being process in the Trump administration.

There is a sense that these

systems or

structures are an affront to peace, justice, and the American way.

But it seems to me that these processes and these structures that at least once characterized global affairs, that's what makes it possible to predict how the future is going to play out.

I mean, my question for you, Gideon, is

do we now know nothing,

whereas before we knew a little about what the future of global politics are going to look like?

Are we just utterly at sea now that the biggest and most powerful country in in the world just rejects all the normal

structures by which the system used to work.

Aaron Powell, I think we're even more at sea than we were before because,

yeah, I mean the fact that the US

adhered to certain basic principles that it itself had helped to put in place after 1945 was a constant in

you know, a very uncertain world.

I mean, obviously, the big geopolitical shocks, there have been plenty, and they tend to be things that come at you from totally nowhere, you know, 9-11,

the world changes one day to the next, or, I don't know, going back further back, Saddam Hussein suddenly invades Kuwait.

The idea of a world-changing event that happens very quickly and makes you rethink that does happen.

But this, in a way, was something that nobody would have anticipated because we thought we understood America's conception of democracy and the rules it would operate under and that there were limits to its foreign policy.

There were certain bipartisan commitments that America would be more or less behind unless there was a revolution and perhaps there just has been one.

Turns out those limits are not really written down and if they are,

writing things down is boring.

You know, there's a lot of just things that turned out were just like norms and conventions.

Completely, which is why the American system has been less robust than we thought it might be.

Yeah.

Because a lot of it relied on what the British call the good chap theory of politics that you know people wouldn't do that because that would be really disgraceful simply isn't cricket yeah exactly so it's deeply unpredictable but in a funny way I mean this you guys have better place to comment than me I wonder whether in a way the unpredictability now

is almost like a stabilizer for markets because can Trump can do something outrageous and then people get the idea oh well like it'll probably change his mind in like 10 days time so some some guy called rob something or other coined this thing, the taco trade.

Trump always chickens out.

My worry is that he doesn't necessarily always chicken out anymore.

You know,

he's like, Switzerland, 39%, whack, you know.

You know, India, whatever percent they're on now, and I'll double it tomorrow if you say.

Yeah, I'll double it tomorrow if you say something horrible about me.

And it's like, how on earth?

Sure.

And so, I mean, I don't quite know how the Indian market's been doing, but I mean, if India's really facing 50% tariffs for the foreseeable future, you'd think that'd be a bit of a problem for a lot of big Indian companies.

Last time I looked, stocks were doing okay, but the currency, the rupee, was having a bad time.

In the case of both Brazil and India, I'm not sure we're a huge market for their stuff.

So that helps them a little bit.

Yeah, no, I mean, they're big countries, so they'll have a big domestic economy.

But I think that, you know, I think the US is India's top export market, and there are companies there, you know, that

do do a lot of business with the United States.

And also, I think one of India's plays was that it was marketing itself as the alternative to China.

You know, it's not safe to manufacture in China anymore because Trump's going to really isolate them.

So come to India.

And they spent decades building up that relationship, right?

The Indian side.

And, you know, Apple opened up in India under pressure from the United States to diversify away from China.

And now India, you know, has been hammered.

So I don't know what you make of that if you're Tim Cook.

Gideon, if I was a world leader right now.

God help us.

No, he'd be much better than some of the others.

Please, Rob, change career.

My first principle would be

survive until it's someone else.

Right?

That would be the MO is.

If all goes well, he's got one more term to serve.

So it's three and a half more years.

keep the lines of communication open keep the dialogue going and hope things are different that you know three and a half years down the road is that the approach the world is taking are people just trying like in a holding position until something happens it's hard to talk about everybody in the world obviously but yeah but certainly some of the key allies i mean i remember talking to somebody at the sort of in the in the british establishment who said quite you know we were were talking about all the various things that could go wrong in Trump II and he said sort of deep sigh well it is only four years and I thought wow that really is clutching at straws but then thinking thinking about it a little further I thought what this guy was relying on is that there are sort of deep structures in the US-UK relationship that have been built up over decades particularly intelligence cooperation, you know, that they

embed each other's intelligence offices, you know, in each other's organizations.

That kind of thing is still going to be there.

And I think they hope that it gives a sort of balance to the relationship that will eventually survive.

Certainly does sound like clutching at straws to me.

Now, in addition to all of this like weird diplomatic stuff and rule breaking or norm breaking, it's hit corporate America too in style.

So we've seen some really stark examples in just in the past couple of weeks of basically, basically, you know, you scratch my back, I'll scratch yours.

So, the administration struck a deal with NVIDIA, the chips company, which is like no small company, right?

It's a $4 trillion company, an AMD saying, look, if you want to sell these certain types of chips to China, then you need an export license.

Ooh, fancy.

And you have to pay us 15%, one five of the revenues that come from it.

Meanwhile, you've got Tim Cook, who you mentioned from Apple.

He turned up in the Oval Office the other day with like a block of gold for the president with like a disc on top of it.

Was it just gold coloured or was it actually gold?

He said it was 24-karat gold with like this kind of glass disc thing on top of it.

People are kind of paying tributes almost to the president.

That's in the politest terms you can muster.

What is the name of this political system, please?

What is going going on here?

Gosh,

well,

I'm trying to avoid the C word.

There are several of them, so be careful.

C for corruption.

Probably the best log mix available to you.

But yeah, this is this is different, isn't it?

Yeah, but in a way, it's quite familiar to lots of countries around the world, you know.

So that if you're in,

I don't know, not necessarily current Indonesia, but say under Sohato or anywhere else where

there's the big guy

who's a bit unpredictable and who has family members you really want to keep in with, who also have business interests, who also has a sort of orbit of business people around him.

And then sort of clinging on at the edges, there are a few technocrats who are trying to keep the show on the road, who maybe you might go and have a chat to, and they'll try and do their best to kind of smooth out the edges.

So what feels totally bizarre in America is actually kind of the way a lot of countries operate.

Let me ask a simple question here.

The kind of government, the kind of system that Gideon just described,

I struggle to think of a government with that structure.

Let's call it an autocratic structure.

that has provided good returns for investors.

Now, maybe some of them have good economies.

That's a separate question.

So let me just ask you two.

Can you have a good market economy under autocracy?

Not saying that America is all the way there yet, but taking as

granted that maybe it's edging in that direction in an unpleasant way.

None of these parallels are precise.

But you can say that in Russia, you had under Putin fairly quickly, it became evident that he would turn on some of the biggest businesses in the country.

He takes over UCOS, breaks it up, hands out the assets to his cronies, that you had to be in with the president and that the president was liable to take pretty unpredictable actions both in foreign policy and domestic policy.

And yet, as I understand it, for quite a while,

the Russian economy does okay because of oil and so on.

And Russian markets do well.

I mean, there were plenty of people investing in Russia, both directly and in portfolio investment.

Yeah, I guess the point is that these things experience

sudden stops.

And the parallel I would think of actually is China.

So for for years, investors were making plenty of good money out of China.

And then all of a sudden, the president will turn on a dime and clamp down on the technology sector.

Or

suddenly, some executives will disappear from public view.

Or suddenly he will decide that the education sector needs completely re-regulating.

And you just get these air pockets in markets that form when investors say, hang on, there's just been a random regulatory clampdown or rule change of some kind.

and I just don't know where the next one's going to come from, and I can't invest in this.

And I guess the dystopian vision of the future is that the US is heading in that direction.

Aaron Powell, China's a good example, I would say, because it shows very clearly the distinction between the growth of the economy and the investability of the markets.

It's clear that China has had an incredible growth model over the last 40 years, But it's just been really hard for investors outside of China to participate in that.

It's been too volatile, it's been too unpredictable, and the market has just remained a bad reflection of kind of the growth and output of the country.

So

it's worth pulling the two apart.

Sure.

But although, I mean, you know, it's always hard to be sure what's going on because you could say, well, in China, A, it was really a totalitarian system.

It is a one-party state.

It also didn't have full capital convertibility, so that would put you off.

And there was the possibility of investing in Hong Kong, which was a way of getting access to the China market.

And Hong Kong did okay.

You know, another parallel might be India, where

people have, you know, all the people who assess how democracy is doing say there has been a process of democratic degradation in India.

They do still have elections.

They do still have a free press, but there's pressure on universities, on the press, and there clearly are favored business families and so on, and an element of arbitrariness in decision making.

Modi does do slightly crazy things every now and then.

And yet the Indian market's done okay.

It's done very well in recent years, better than okay in recent years.

Yes.

Absolutely.

And maybe the way that people invest in these countries is that you say, well, okay, I'm going to look for the family or the business that has a stable relationship

with the government, you know, the Anbarnis or whatever, and their businesses

against the background of a growing economy will probably outperform because they've got

this in.

I just wonder whether anyone has a stable in with Trump.

That is an interesting question.

Because if you look at the fate of Musk, for example,

everybody says, oh, it's going to be great for Tesla.

And then, oh.

And then suddenly, Rottrow, not so great.

One quick thing I do want to talk about here is it's not just countries and it's not just companies.

Trump is launching an assault on institutions in the US as well.

You can see this with the Bureau of Labor Statistics.

You can see it with the Federal Reserve,

the central bank.

And markets are like, la la la, whatever.

Corporate earnings are still okay.

Let's worry about this another day.

I mean, Rob, my sense is that like stock markets are not really supposed to be gauges of liberal democracy.

They're supposed to measure how corporate America is performing and from that by that token they're kind of doing okay at this.

But

you know the consequences of mucking about with institutions like this will become clear over years, right?

Like why are markets not doing anything about this today?

Well I would cite two things.

First thing is despite their reputation for foresight, markets are actually pretty myopic.

I think the experience shows that.

They count what they can count, they assess what they can assess, and they can't see the future particularly well.

So the long-term consequences of a drift away from rule of law towards rule of person is just not the kind of thing markets are very good at quantifying.

The second thing I would say that makes this kind of geopolitical environment so hard to read is that there's this incredible technology story going on at the same time, where we have kind of five or six companies that are unbelievably profitable,

growing leaps and bounds, they're enormous, and they're also powered by this perhaps fantastical and perhaps not fantastical artificial intelligence story.

So there's this incredible overlay of optimism, which helps to explain why

while

American politics do seem to be drifting in an anti-market direction, markets aren't noticing, don't care.

But just really quickly, Gideon, is it silly to talk about a drift into authoritarianism?

Or do you think from all of world politics that you've looked at over the years, do you think that is a reasonable analogy to draw?

I think it's reasonable, I'm afraid.

I mean, I think that maybe we've been sort of conditioned to thinking that the transition to authoritarianism were associated with a single dramatic event.

You know, Mussolini marches on Rome.

After the Reichstag fire, Hitler suspends democracy in Germany.

But I think what you're seeing in the United States is so far you haven't had that one dramatic event where you say wow it's kind of over but you got a series of small things

which would have been enormous in previous eras it has to be said which accumulate but which don't look great we've mentioned you know some of them already on the show you know the sacking of the bureau of labor statistics etc etc those kinds of things are not meant to happen in countries with independent institutions

We are frogs in a pot, and it's getting warm in here.

Not very cheerful for you, listeners.

I'm very sorry about that.

Maybe we will lighten the mood in a second with long shots.

Bonds are back.

And so is All the Credit, P Jim Fixed Incomes Monthly Podcast Series.

From the latest trends to long-term perspectives, you'll get timely fixed income insights from leading economists, research analysts, and investment professionals.

Whether you're new to bonds or a seasoned investor, tune in to all the credit wherever you get your podcasts.

This podcast is intended solely for professional investor use.

Past performance is not a guarantee of future results.

Okey-doke, listeners, it's time for long short, that part of the show where we go long, a thing we love, or short, a thing we hate.

Gideon, I did give you fair warning this was going to happen.

What is your long or short?

Well, I picked a long that actually sort of vaguely fits with the theme of the show because it's about the new

right or about authoritarianism.

I discovered it only last week reading Jemima Kelly's fantastic piece on Curtis Yarbin, the fashionable far-right thinker, can I call him far-right?

Who she hung out with.

And at the party he was at and she was at, they were playing this form of music called bard call,

which is

popular music set in a sort of medieval, played in a medieval style.

So I've now looked it up and I'm an addict.

You were trying to get me to listen to this in the office the other day and je refuse.

This is simply not going to happen.

It always had to be played on lutes.

Yeah, yes, yes.

Now, I am in these troubled times thinking of the things that bring us together.

And in this particular instance, that is the Casio F91W watch, which it turns out, I'm a new purchaser of these fun little pop little watches.

It turns out Gideon and Rob are already all in on these watches.

They're true believers.

Absolutely.

I've been for ages.

And the fact Rob has even written about it in the FT shows how much attention you pay to his ramblings.

They're like

brightly coloured,

14 quid, very basic little digital watches.

It's a win from me.

And now that I've started getting them, I can see that they're all over the place.

And I had a a particular moment of triumph when I was at a luxury goods conference full of people flogging the most expensive watches in the world.

And they said, and what watch are you wearing, sir?

And I showed this horrible plastic yellow.

Anyway.

Rob, what you got?

Well, on a previous show, I used the long short to go long shorts.

Yes.

And I have subsequently written a column on this topic.

The column argued that it might be acceptable to wear shorts in the office now that global warming has turned New York into an inferno.

And

I have gotten the most unbelievable number of comments.

Hate mail?

Oh, some serious hate mail.

Derek,

the New York news editor of the FT, has demanded that we withdraw the article and issue a formal apology.

What I am long is the ability of the male knee to cause controversy.

Yeah.

Who knew this hairy joint would cause such a brouhaha?

Yeah, so there you have it.

Casio watches, men's shorts, and bardcore.

Just sounds incredibly bad.

I refuse to look this up.

Listeners, we are going to be back in your ears on Tuesday, so listen up then.

And in the meantime, do not listen to Bardcore.

Unhedged is produced by Jake Harper and edited by Brian Erstadt.

Our executive producer is Jacob Goldstein.

Topha Vorges is the FT's acting co-head of audio.

Special thanks to Laura Clark, Alistair Mackey, Greta Cohn, and Natalie Sadler.

FT Premium subscribers can get the Unhedged newsletter for free.

A 30-day free trial is available to everyone else.

Just go to ft.com/slash unhedged offer.

I'm Katie Martin.

Thanks for listening.