Welcome To Phase Two(s)

By Michael Every of Rabobank

Welcome To Phase Two(s)

Welcome to Phase Two(s), and not just the US-China trade deal, where Beijing has suspended a ban on approving exports of “dual-use items” related to gallium, germanium, antimony to the US and with issues on the MAGA right, he’s seen as unable to win the 2026 midterms from that direction). Indeed, we just saw a flurry of major announcements:

• The DOJ will open an antitrust investigation into the meatpacking industry in an attempt to force down prices;
• Trump attacked health insurers and will send subsidies given to them under Obamacare directly to voters;
• the White House is proposing 50-year mortgages;
• and Trump will redirect tariff revenue directly to households via a $2,000 stimulus check, excluding the rich.

Moreover, the Fed’s Miran gave a speech, another FT op-ed arguing, “The old WTO model is dead – sovereign control and national security matter.” It backs a target of BALANCED TRADE between the three countries rather than “because markets”, and all three freezing out China. We flagged this as a logical US economic statecraft strategy months ago.

In any normal year, one of the policy headlines above would be worthy of pages of market-moving study. In 2025, we get six –if the op-ed is a trial balloon– at once to only cursory notice: there’s just too much happening and linking it all up is just too confusing – or threatening. More so when everything AI goes up and down like a yo-yo. Yet depending on policy implementation, we may have to rip up our 2026 forecasts; or burn the textbooks entirely.

Even the Fed’s Williams is warning that the gulf between the rich and the poor risks a US downturn: but is his suggested answer just ‘rate cuts’? Historically, these increase inequality, and political populism, due to asset prices surging and wages staying flat. With geopolitical supply chain problems on top, we might get more commodity price inflation too – unless we see some serious reordering of both priorities and things.

This isn’t just a US issue. In Japan, the BOJ has indicated a December rate hike is possible, Phase Two of normalizing policy; yet PM Takaichi’s Abenomics Phase Two dangerous stalemate”, the risks are currently when, not if, we get a further Israel-Iran war – Venezuela could blow up the oil market and destroy Putin’, and “An anticipated US military strike against Caracas would drastically re-shape the global economy.” In short, much lower energy prices, perhaps, after a US push/putsch.

Genetically Engineered Babies Are Banned. Tech Titans Are Trying to Make One Anyway’: as a super-smart friend said to me years ago, when do we get to see AGI robots vs genetically-engineered superhumans? Maybe not as long as you think.