We are in an era of regime change: Pax Americana is breaking down, leading to a more volatile, inflation-prone system. Shocks are a feature. Hard power and physical control of resources (like energy) matter again and will dominate for years.

Root causes: end of Cold War unipolarity, rise of China, failing economic settlement in West, return of nuclear question. Trump is an accelerant, not the root cause.

Who knows, but rational actors signal a deal might be possible. Portfolio is positioned to protect against escalation or benefit from benign outcome.

Even with a truce, damage is baked in: disruption has been rippling out at tanker speed (15 mph). Over 10 million barrels/day offline for 6+ weeks creates a long fuse on disruption.

Market trained to fade geopolitical shocks. 'Taco trade' supercharged; Trump administration foaming runway with 'hopium' to get machines to buy. Supported by tailwinds: rate cuts, fiscal stimulus, AI boom, strong earnings. Market cares about rate of change: when oil stops going up, news is less bad, market banks bullish outcome.

Important non-fundamental investment flows (machines/strategies). Symmetry of near-term risk is re-escalation or prolonged stoppage ? 'look out below'.

Failure of conventional hedges (bonds, gold, yen) is key feature of regime change. Energy is a useful hedge. Taking profits in Brent. Tail hedge derivatives will be extremely powerful if shock scenario materializes.

In war's first weeks, bonds sold off with equities, gold didn't work (though had strong run later), yen didn't work (energy shock).

Long-term tailwinds intact: fiat currency compromise, inflation instability, fiscal stress, geopolitical angst drive desire for neutral FX/reserve assets. Expect more volatility from momentum players, but structural tailwinds good.

Central bank buying drove gold post-Ukraine; momentum players caused big corrections. Countries like Turkey may liquidate gold to defend currency, but doesn't negate long-term trend. Expect central bank buying to continue, especially China post-Middle East events.

More policy volatility from Trump. Window closing before midterms. Narrative: dealt with Venezuela, trying to move on from Iran, then Cuba, maybe Greenland. 'Bread and circuses' dynamic due to cost of living killing incumbents ? distraction techniques, bribes, price controls, Fed spat.

Internationally, America playing for detente with China since rare earths weaponization. Beijing delighted Washington alienating allies. Taiwan: perfect time for China given max supply chain leverage, but PLA leadership in 'perma purge' state. China will continue pressure campaign, might pressure Iran to deal.

Flavor of recent moves: bought short-dated UK bonds on sell-off (market implied hikes unlikely), 10-year US TIPS (decent real yield), long-dated Japanese bonds, beaten-up software names, China tech. Interested in LATAM (resources, favorable demography), commodities (nominal GDP rich world), left-behind Mag 7, automation/robotics, repurposing legacy industrial capacity (e.g., car makers to defense).

In era of unstable stock-bond correlation, must be more active. Commodities interesting as authorities will run system hot to inflate nominal GDP and burn off real debt value.

UK has good fundamentals: households de-geared, rates cut from low levels could start private credit cycle ? magic for UK assets. Taking exposure to UK equities. Big question on political stability (local elections, leftward drift).

Government big in wrong places (defense investment delayed). Need trade-off between welfare and security; UK far from necessary decisions.

Medium-term base case: dollar goes down. Traditional providers of savings (East Asia, Germany, Gulf) will keep more savings at home for resilience, infrastructure, rearmament. Less fresh new money to plug US twin deficits ? brings dollar down.

Short-term lift from positive terms of trade shock (energy surge helps US as net exporter). Tactically watch: rate differentials, if energy shock continues (good for US terms of trade), US equity performance relative to world. In general, fiat currency not a great place vs. real assets.