“No terrorist force will stop American commercial and naval vessels from freely sailing the Waterways of the World,” Trump posted Saturday, pounding Houthis in Yemen, warning Iran’s leaders that they too will be held to account. “It has been over a year since a U.S. flagged commercial ship safely traveled through the Suez Canal, the Red Sea, or the Gulf of Aden,” he wrote, reminding the world of how fragile the state of global free trade truly is. How it was established by force. And how low-cost drones now make it ever more costly to defend.

Overall: “Germany is back,” declared Friedrich Merz, having successfully convened with the Green party to exorcise Deutschland’s demons of Weimar past. So, the deficit limit that Germans imposed upon themselves will be lifted, their debt brake released. It’s hard to overstate the importance of such a shift in Europe’s most culturally austere nation, its biggest economy. Deficits and debts will rise across Europe, money supply, inflation too. Yet the dollar fell against the euro this week. In fact, the dollar has been falling since mid-January. And it is almost back to its level on Sept 9th last year when Mario Draghi published his European Competitiveness Report. Depending on one’s perspective, his publication could be seen as a coroner’s report for the EU, or a how-to-guide for making Europe great again. But markets see the glass half full. The German equity index is +26% since that Sept 9th date (the S&P 500 is +3%). America’s equivalent of the competitiveness report was delivered at the ballot box on Nov 5th. The nation voted for a continuation of the Trump 1.0 economic experiment. 2.0 has been wild. In the 54 days since Trump’s inauguration, 89 Executive Orders have been signed, DOGE has raced through the Federal bureaucracy, and hot trade wars have broken out across every front. Other things too. Nato, Greenland, Panama, Gaza. Gold is at new all-time highs, and that’s not all that surprising. US stocks are lower now, which is disappointing to many, but given the vastness of policy change, and the volatility of that change, which is far more than was expected, equity weakness is not such a big surprise. But the dollar is weak, and with trade wars raging, the geopolitical landscape more dangerous than before, and with US stocks under pressure, dollar weakness is surprising indeed. That’s the sort of signal worth watching for, because often, it presages a new fundamental force emerging, and a far bigger trade.

Week-in-Review: Mon: Washington and Beijing are discussing a potential Trump-Xi Jinping summit in June in the US. Trump looks to enforce sanctions of Iranian oil production to force negotiations. China hits US farm goods with retaliatory tariffs. Ukraine seeks to persuade US to resume aid in high stakes talks. Romanian far right leader Georgescu appeals against election ban at Romania’s top court. Ontario premier hits power exports to US with 25% surcharge. Trump imposes 50% steel and aluminum tariffs on Canada as a response. Syrian government agrees deal to integrate Kurdish forces. State Secretary Rubio says Ukraine will need to make territorial concessions for peace deal. China PPI -2.2% (2.1%e), S&P -2.7%. Tue: US and Ukraine hold talks on ending war with Russia. Nato urges EU and Turkey to deepen ties. Trump backs down on 50% steel and aluminum tariffs on Canada. UK’s Starmer will not impose immediate UK counter-tariffs to US steel levies. US House passes vote to extend federal funding until end of September. Trump to slash workforce at US education department. Romania’s top court upholds election ban on Georgescu. Philippines’ ex-president Duterte sent to The Hague over drug war killings. NFIB small bus. index 100.7 (101e), South Korea Unemp rate 2.7% (3.0%e), S&P -0.8%. Wed: EU and Canada retaliate after Trump’s metals tariffs take effect. Greenland party favoring gradual independence wins election. UK regulators drop diversity and inclusion rules for financial firms. Chinese authorities summon Walmart executives after pressuring local suppliers to absorb Trump’s tariffs. Putin visits captured territory of Kursk in Ukraine. Canada cuts rates by 0.25% to 2.75%. US CPI 2.8% (2.9%e), India CPI 3.61% (3.98%e), Brazil Inflation 5.06% as exp, Russia CPI 10.06% (10.00% as exp), S&P +0.5%. Thur: Germany’s Merz offers concessions to Greens over ‘historic’ spending plan. Trump threatens 200% tariffs on EU alcohol imports and demands proposed tariffs on US whiskey to be dropped. Poland’s president urges US to move nuclear warheads to Poland. Nato’s Rutte meets Trump. Russia says its forces have retaken key Kursk town of Sudzha. Israel strikes Syrian capital in warning to new leader. Trump urged to appoint special envoy to China. Moscow says it is unwilling to drop maximalist demands in ceasefire talks. Spain’s PM Sánchez calls for cyber and climate to count as defense spending. Tesla warns Trump administration it is ‘exposed’ to retaliatory tariffs. DeepSeek to concentrate resources on building machines with humanlike cognitive capabilities. Mexico IP -2.9% (-1.7%e), US Jobless claims 220k (225k e) / Cont claims 1870k (1888k e), S&P -1.4%. Fri: China urges CK Hutchison to ‘think twice’ on Panama ports deal. Beijing announces consumption plan amid growing hopes for the country’s AI sector. China courts global CEOs for meeting with Xi. Germany’s Merz agrees spending deal with Greens. US tightened sanctions on Russia by restricting payments for energy. G7 warns Russia of expanded sanctions unless it backs ceasefire. Putin asked US envoy Steve Witkoff to convey messages to Trump. Top Senate Democrat Schumer backs Republican bill to avert shutdown. US judge in Maryland directed 18 agencies to temporarily rehire thousands of terminated employees. Greenland’s political leaders unite to condemn Trump takeover talk.  Foxconn CEO says Trump tariffs are proving ‘big headache’ for his tech giants clients Apple and Amazon. Gold hits $3,000 for first time. Germany CPI 2.3% as exp, France CPI 0.8% as exp, Poland CPI 4.9% (5.3%e), China M2 7.0% as exp, Brazil Ret sales 3.1% (3.5%e), US Mich sent 57.9 (63.0e), S&P +2.2%.

Weekly Close: S&P 500 -2.3% and VIX -1.60 at +21.77. Nikkei +0.4%, Shanghai +1.4%, Euro Stoxx -1.2%, Bovespa +3.1%, MSCI World -2.0%, and MSCI Emerging -0.8%. USD rose +14.5% vs Ethereum, +5.3% vs Bitcoin, +0.4% vs Sweden, +0.4% vs Yen, +0.3% vs Indonesia, +0.3% vs Turkey, and +0.1% vs India. USD fell -5.0% vs Russia, -1.6% vs Mexico, -0.8% vs Brazil, -0.4% vs Euro, -0.3% vs Australia, -0.3% vs South Africa, -0.1% vs China, -0.1% vs Sterling, flat vs Canada, and flat vs Chile. Gold +3.0%, Silver +4.9%, Oil +0.2%, Copper +3.9%, Iron Ore +2.3%, Corn -2.3%. 10yr Inflation Breakevens (EU +3bps at 1.96%, US -4bps at 2.31%, JP -2bps at 1.64%, and UK -1bps at 3.37%). 2yr Notes +2bps at 4.02% and 10yr Notes +1bp at 4.31%.

2025 Year-to-Date Equity Index Returns: Poland +30.5% priced in US dollars (+22% priced in zloty), Colombia +26.2% priced in US dollars (+17.5% priced in pesos), Czech Republic +23.7% in dollars (+17.6% in koruna), Austria +22.8% (+17.3%), Greece +21.2% (+15.2%), Germany +20.9% (+15.5%), Hungary +19.6% (+10.8%), Chile +19.5% (+11.9%), HK +19.4% (+19.4%), Italy +18.4% (+13.1%), Spain +17.9% (+12.2%), Ireland +17.8% (+12.1%), Sweden +17.5% (+8%), Finland +16.5% (+11.3%), Euro Stoxx 50 +16.1% (+10.4%), Brazil +15.6% (+7.2%), Norway +15.5% (+7.9%), France +14.4% (+8.8%), Switzerland +13.9% (+11.3%), South Africa +11.3% (+7%), Mexico +11.2% (+6%), UK +9.1% (+5.6%), Belgium +8.7% (+3.4%), Korea +8.4% (+7%), Netherlands +8.4% (+3.1%), Portugal +6.6% (+1.4%), Turkey +6.4% (+10.3%), Israel +5% (+5.8%), Vietnam +4.5% (+4.7%), Singapore +3.8% (+1.3%), China +2.9% (+2%), UAE +0% (0%), Canada -0.6% (-0.7%), MSCI World -1.1% in US dollars, Japan -1.7% (-7.1%), Australia -2.4% (-4.5%), Saudi Arabia -2.4% (-2.6%), Philippines -2.5% (-3.6%), New Zealand -3.9% (-6.4%), Denmark -4.1% (-8.3%), S&P 500 -4.1%, Taiwan -5.2% (-4.6%), India -6.8% (-5.3%), Malaysia -7.3% (-7.9%), NASDAQ -8.1%, Russell -8.3%, Indonesia -8.8% (-8%), Argentina -10.9% (-7.8%), Thailand -14.7% (-16.2%).

Lone Star: “This is a lot of hullabaloos about nothing, really,” said Lone Star, sizing up this stock market correction. “They’re basically saying let’s increase tariffs to pay for tax cuts, and ensuing uncertainty will push 10yrs lower, which we also want,” he said, channeling Treasury Secretary Bessent, Trump too. “They’ll talk about saving Main Street which will play; it’ll put pressure on tech valuations, but they don’t like those companies anyway. And if the economy slows down, it’ll take inflation lower and the Fed will cut, which is what they want.” 

Lone Star II: “And a big tax cut is forthcoming,” continued Lone Star, one of the top performing US endowment CIOs. “The combo of tax cuts, regulatory reform and the delayed impact of Fed cuts, will collectively hit in 4Q25/1Q26 and the economy will be off to the races at 3%+ annualized GDP,” he said, looking out across the vast open, peering beyond the horizon. “And we’ll grow our way out of some of the current debt, entitlement, and valuation issues.” That of course takes us into the heat of mid-term election season, which is what really matters.

Lone Star III: “But there’s still pessimism to be had,” said Lone Star. “More tariff saber rattling and/or actual moves. French wine, no one really cares,” he said. “And there’s probably still long-biased equity length to be cut before this is over, but I’m surprised people are being so short-term focused at the moment,” he said, most at peace when walking against a crowd. “What they’re doing generally makes a lot of sense when you zoom out a bit. Sure, people lose their minds about Trump, but he’s not the one to watch. Bessent is engineering what needs to happen.” 

Lone Star IV: “Back at the highs, the market was priced for 5% annual gains based on my estimates of earnings growth for the next couple years, and assuming no multiple expansion,” explained Lone Star. “If those things remain in place, and I think they still should, then we’re closer to a 10% IRR from here,” he said. “If we get another 5-7% decline at the index level, then I see the IRR for the next couple years being more like 12-14%. That’s pretty darn compelling, which then makes it likely to be where this correction ends.”

Lone Star V: “All this assumes no multiple expansion,” said Lone Star, tending toward the conservative, covering his downside to let the upside take care of itself. “But I see more upside than we’ve had in the past. I think A.I. will get more compelling in the next 2 years, along with the economy picking up speed, so pretty easy to reinflate the market multiple,” he said. “And if we get a big corporate tax cut, then earnings growth could be meaningfully higher.”

Anecdote: “Revised 2025 Bitcoin Act has been published,” texted Marcel Kasumovich, never really sleeping, one eye always open. “Key differences: (1) 200k bitcoin purchases per year, (2) Holding period now permanent, (3) Exchange Stabilization Fund (ESF) engaged as a coordination function, and (4) Gold reserve revaluation being used to fund bitcoin purchases,” continued Marcel, keeping the team current. The ESF is an emergency reserve fund managed by the US Treasury, created under the Gold Reserve Act of 1934. Initially funded with $2bln from the profits of revaluing US gold reserves after abandoning the gold standard, its original purpose was to stabilize the dollar’s exchange rate. “Each Federal Reserve Bank is independently funded by Gold Certificates issued by the Treasury. By law, the gold is valued at $42.22 per ounce. Book value of those certificates is ~$11bln, market value ~$800bln,” wrote Marcel. “After revaluing the gold reserve to market prices, the Fed would be mandated to send the difference to the US Treasury. Voila, ~$789bln in fresh capital for the Treasury.” The Fed would credit the Treasury with nearly $789bln in newly created money (Fed liability), set against its revalued gold reserve (Fed asset). These newly minted dollars could buy bitcoin, fund a sovereign wealth fund, or be used by Treasury for other purposes. “This would insulate the US balance sheet to a dollar depreciation. Hence, a Mar-A-Largo Accord aimed at weakening the US dollar would be shared with foreign creditors, a pill they would swallow with hopes and expectations of playing a stronger role in the future monetary system.” If the dollar weakens, gold and bitcoin appreciate, and the US is not particularly worse off even as foreign investors lose money in real terms. “The directional of travel is clear.”

Good luck out there, 

Eric Peters

Chief Investment Officer

One River Asset Management

Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.