Since Donald Trump’s return to power in 2025, tariff revenue has exploded. In May and June alone, tariff revenue was more than the whole of 2024. Expectations are for tariff windfall in 2025 to be at least 3 times that of commonly cited $41bn in 2024. Assuming no change –which we accepted is the most unlikely outcome – 2026 tariff revenue could beas much as $300bn.

Yet, the US deficit is ballooning toward $2 trillion and national debt will likely hit $37 trillion by year end.

Furthermore, the U.S. dollar has been on a near-uninterrupted bull run over the past decade. With structurally higher interest rates, historical safe-haven characteristics, a globally liquid treasury market, and the gravitational pull of a giant domestic consumer base, exporters, reserve managers and investors alike have gladly held onto or accumulated dollars.

Consequently, foreign investors have poured trillions into US equity markets as the ‘FOMO’ and ‘US exceptionalism’ takes hold.

As I’ve discussed before, the ‘US Exceptionalism’ narrative is not driven by innovation or better business savviness…it is driven by a the (exorbitant) privilege of issuing the global reserve currency alongside a ballooning sovereign debt bubble, which collectively has ensured the US consumer is the only game in town.

But cracks are showing up.

It the June FOMC meeting, the committee members universally agree the risks to unemployment and inflation are both to the upside. The stagflation risks are real and increasingly likely. As the second chart shows, whilst expectations for economic growth are being revised down, inflation expectations are going the other way.

Not least, political infighting between democrats and republicans – which should perhaps be described as the ‘Liberal’ and the ‘Autocratic’ – are not only causing sociopolitical risks but hiding the ever-expanding reality of the America’s ‘Great Inequality’.

So, I would argue the 'Exceptionalism' narrative and tariff boon are two sides of the same decaying coin. Both rely on global confidence in a system buckling under trillions of Dollars in debt and a weakening societal structure.

When the inflection point hits, whether from social unrest, political turmoil, or a loss of market confidence. the outflows could be brutal.

The bottom line is America’s" strength" is increasingly becoming a high-stakes bluff. Tariff revenue and equity inflows are the consequences of a fallacy. For now, it is proving to provide emergency life support for a patient bleeding from self-inflicted wounds. When the narratives shift, the house of cards collapses.

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Market Review

Global equities extended their rally in June, with the S&P 500 and Nasdaq reaching all-time highs, driven by renewed optimism over U.S. trade negotiations and strong performance in technology and AI sectors. The U.S. market’s rebound closed the gap with earlier European gains, though overall U.S. year-to-date returns remain modest. Hong Kong’s Hang Seng led global markets, surging over 20% YTD, fuelled by tech rallies and IPO activity, while Germany’s DAX also posted robust gains supported by defence spending and easing inflation.

Fixed income faced continued headwinds as long-term yields rose, prompting outflows from U.S. long-term bond funds amid concerns over fiscal policy and debt levels linked to proposed U.S. legislation. However, major U.S. banks showed resilience, passing stress tests and boosting investor confidence.

Currencies saw the U.S. dollar weaken further, supporting emerging market assets and commodities. Oil prices softened due to easing Middle East tensions, while gold remained steady. Bitcoin stabilised after May’s strong rally, supported by institutional interest.

Overall, markets remain cautiously optimistic, buoyed by easing geopolitical risks, trade progress, and robust corporate earnings, but investors should prepare for potential volatility ahead given macroeconomic and policy uncertainties.

Diversification is key…

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To see graphs, download the PDF using the button at the top of this page.