{"text":[[{"start":6.4,"text":"A few days ago, just as bombs were hitting the Middle East, Scott Bessent, the US Treasury secretary, held private meetings with top Wall Street financiers."}],[{"start":17.950000000000003,"text":"He had a key message to impart, I am told: don’t sell assets, since markets will soon rebound from the slump — just as they did a year ago after the so-called “liberation day” tariff shock."}],[{"start":31.250000000000004,"text":"Was he correct? Yes — given Wednesday’s stunning relief rally. As investors parse the recent head-spinning events, the first lesson to note is that the “Taco trade” remains alive and well. Trump (still) Always Chickens Out and changes policy if there is market or political pushback, to cite the acronym coined by my colleague Robert Armstrong. "}],[{"start":55.60000000000001,"text":"That is because Donald Trump views equity prices as a key — if not the key — barometer of his success, more than any president before him. Bessent is equally obsessed with bond yields. Hence the “peace” talks with Iran. "}],[{"start":72.29,"text":"And recent events offer two other lessons. One is that the financial system has recently displayed more medium-term resilience than might have once been expected, partly because of extensive recent road-testing. "}],[{"start":87.44000000000001,"text":"Just think about it: asset prices have repeatedly tumbled after shocks such as the Covid-19 pandemic, Russia’s invasion of Ukraine and those tariffs. But on every occasion they rebounded without a systemic crash. That might change given the explosion of non-bank finance. But right now it supports a BTD — Buy The Dip — mantra."}],[{"start":112.18,"text":"A third point is that while Trump’s capricious actions have increased anti-American sentiment and distrust around the world, non-Americans still keep gobbling up US assets. "}],[{"start":123.83000000000001,"text":"This might also eventually change; long-term risks to dollar supremacy are growing, not least from America’s near $39tn debt. But whenever “risk-off” sentiment explodes now, investors act as if America’s capital markets are a more liquid and safe bet than most rivals. This is deeply ironic given that Trump himself is a key source of risk. "}],[{"start":152.56,"text":"But beyond these three points, there are now three additional lessons for investors that are less reassuring. One is a theme that analysts like Carlyle Group’s Jeff Currie have stressed: molecules matter — and they can’t be printed."}],[{"start":169.54,"text":"For while services and cyber innovation are driving 21st-century growth, these are underpinned by chemical and physical processes that have (until recently) often been discounted."}],[{"start":184.87,"text":"So it is doubtful whether markets have really priced in the consequence of supply chain disruption shocks already embedded from the past month of war, not just in energy but petrochemicals too. Hence European leaders’ fears about stagflation."}],[{"start":203,"text":"Next: chokepoints matter more deeply than before and many are beyond western control. Yes, Washington dominates global finance hubs, via the dollar. But it does not (currently) control the energy and chemicals shipping bottleneck that is the Strait of Hormuz; nor key chokepoints around rare-earth minerals and pharmaceutical supply chains, as we learnt last year."}],[{"start":230.9,"text":"These vulnerabilities need to be priced in; indeed I am told a key reason for the slump in private deal making is the fear they are not. But one huge problem, as Gina Raimondo, former commerce secretary, recently told the Council on Foreign Relations, is investors do not reward companies that invest in supply-chain resilience because this is so hard to measure in advance. "}],[{"start":256.94,"text":"And while economists constantly model macro and micro trends, they have paid less attention to “mesoeconomics”, to cite the economist William Janeway — ie the factors in between the two, including supply chain networks. The war with Iran shows this needs to change."}],[{"start":277.37,"text":"Then there is the final lesson: investors need to get better at imagining — and pricing — once-unimaginable disasters. This is hard. No business school teaches students how to model something like a presidential threat to wipe out a civilisation. And the success of the recent Taco trade will undoubtedly make many even more reluctant to do this. "}],[{"start":305.32,"text":"But the grim reality is that even if a ceasefire deal holds in Iran — a big “if” — peace looks elusive. “Because most people tend to have this short-term perspective, they now expect, and the markets are pricing in, that this war won’t last long and that when it ends we will get back to ‘normal’,” writes Ray Dalio, founder of the Bridgewater hedge fund. “[But] we are in the early stages of a world war that isn’t going to end anytime soon.”"}],[{"start":334.11,"text":"Some are preparing for that. The financier Bill Ackman is reportedly developing a “complacency trade” fund to trade doomsday risks. But most investors simply still cannot price disaster in. And if you take a long-term historical view, we could now be “in a transition stage . . . which is roughly analogous to the 1913-14 and the 1938-39 periods”, says Dalio. Gulp."}],[{"start":362.74,"text":"So by all means celebrate that Taco moment and Buy The Dip. But buying a modicum of disaster insurance is also a wise bet. "}],[{"start":381.32,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1775891927_1041.mp3"}