“Bear markets happen when policy stimulus fails,” bellowed Biggie Too, Global Chief Strategist for one of Wall Street’s too-big-to-fail affairs. “They happen when the Fed cuts rates and it doesn’t work, because it’s too late,” barked Biggie. “For that to happen now, we need to see some combination of major DOGE cuts, lasting tariffs, and chronic policy uncertainty that leads to a situation where the cumulative damage overwhelms the Fed’s ability to mount a rescue.” I nodded; no doubt that’s the right way to think about it. “And usually in a bear market, there’s a big credit event that sneaks up from some place no one expected it.”

Overall: “In view of the threats to our freedom and peace on our continent, the rule for our defense now has to be ‘whatever it takes’,” said Friedrich Merz, Germany’s next chancellor. Merz has spoken of an urgent need to boost spending in light of “recent decisions by the American government.” To expand deficit spending in such a dramatic fashion, the Germans must rush through a constitutional change that will remove or alter what they call a debt brake, which had been inserted in 2009 to prevent the kind of runaway deficits and hyperinflation Germany experienced in the Weimar period. To get the two-thirds parliamentary majority needed to make this change will require Merz to support a massive infrastructure spending program in addition to the military expansion he seeks. Only in an existential crisis could something this seismic move so swiftly in Germany. It is the kind of change that comes about perhaps once in a generation, and thus its impact has only just begun to be felt. German bund yields jumped dramatically, but this naturally pales in comparison to the impact of the nation’s industrial war machine shifting into high gear. To a great degree the whole European project was designed to restrain Germany and its historical habits. It worked so well that not even Russia’s invasion of Ukraine provoked much movement. But in a few short weeks, the Americans accomplished what the Russian army could not. And now the gears of change are turning. Having the largest economy in Europe now eager to expand deficits and industrial production has boosted German equities, ignited animal spirits. And as goes Germany, so goes the continent, which is to say that the stagnant Europe of decades past will give way to something new. Let’s hope that all this stimulus will be sufficient to offset the stagnation beginning to manifest in the US. And with any luck, the conflict these profound changes reflect will primarily play out in economic battles and not go kinetic.

Week-in-Review: Mon: Trump doubles the tariffs on China to 20% and confirms he will impose 25% tariffs on Mexico and Canada on Tuesday. Europeans move towards seizing €200bn of Russian assets. Moscow’s spokesperson Peskov says ‘fragmentation of the collective west has begun’. OPEC+ to boost crude output by 138,000 barrels a day in April. TSMC unveils $100bn US chip investment. Turkey CPI 39.05% (39.90%e), Eurozone CPI 2.4% (2.3%e) / core 2.6% (2.5%e), US ISM mfg 50.3 (50.7e) / prices paid 62.4 (56.0e), S&P -1.8%. Tue: Trump doubles down on tariffs and touts achievements on immigration in address to joint session of Congress. Russia agrees to help the US in communicating with Iran on issues including its nuclear program and support for regional anti-US proxies. Israel threatens to cut water and electricity in renewed Gaza siege. US suspends military aid to Ukraine. US government considers selling FBI and DoJ headquarters. Judge denies Musk’s attempt to immediately block OpenAI’s conversion into a for-profit entity. Saudi Aramco chief says DeepSeek AI makes ‘big difference’ to operations. Eurozone Unemp rate 6.2% (6.3%e), S&P -1.2%. Wed: Germany’s Merz strikes ‘game-changing’ deal to boost defense and infrastructure spending. Trump hands carmakers 1-month reprieve from tariffs. Trump threatens to end Hamas unless hostages are released. Macron seeks talks on how French nuclear weapons could protect Europe. UK defense secretary to discuss ‘parameters’ of Ukraine peace plan in US talks. US Supreme Court upholds order forcing foreign aid payments for work already completed. US charges 12 Chinese nationals with hacking American agencies for Beijing. BlackRock buys 2 ports in the Panama Canal owned by Hong Kong Tycoon Li Ka-shing. BoE to ease leverage rules on UK lenders. Arab states endorse alternative to Trump’s postwar Gaza plan. US ADP emp change 77k (140k e), US Factory orders 1.7% as exp / durable goods 3.2% (3.1%e), Russia Unemp rate 2.4% (2.3%e), S&P +1.1%. Thur: US backtracks on Canada-Mexico tariffs in latest sharp shift on trade. Trump sends letter to Iran’s supreme leader calling for negotiations on its nuclear program. EU (ex. Hungary) puts on show of solidarity with Zelenskyy after clash with Trump. UK prime minister talks to around 20 countries about joining ‘coalition of the willing’ to have troops on the ground in Ukraine. South Africa facing difficulties over national budget following withdrawal of HIV/Aids programs. Trump restrains DOGE to avoid risk of losing ‘most productive’ civil servants. Eurozone Deposit facility rate 2.5% as exp / refinancing rate 2.65% as exp / lending facility 2.9% as exp, US Jobless claims 221k (233k e) / cont. claims 1897k (1874k e), S&P -1.8%. Fri: Fed’s Powell plays down growth worries after jobs report disappoints. Ukraine to start negotiations with US. Trump threatens Russia with additional sanctions and tariffs in bid to bring both countries to negotiating table. Poland PM Tusk says country needs to acquire nuclear weapons. China’s foreign minister Yi criticizes US president over increasingly hostile trade relations. US Treasury Sec. Bessent says Trump ‘confident’ China will not invade Taiwan during his presidency. Far-right Romanian presidential candidate receives support from both the Trump administration and Russia. UK foreign secretary open to joint financing of military spending to boost continent’s security. Assad loyalists clash with Syrian security forces. US money market assets top $7tn. Eurozone GDP SA 1.2% (0.9%e), Brazil GDP 3.6% (4.0%e), Mexico CPI 3.77% (3.75%e), Canada Unemp rate 6.6% (6.7%e), US Chng in nonfarm payrolls 151k (160k e), US Unemp rate 4.1% (4.0%e), Canada jobless rate 6.6% (6.7% e), S&P +0.6%.

Manufacturing PMI (high-to-low): India 56.3 (previous month 57.7), Indonesia 53.6 (previous month 51.9), Sweden 53.5 (prev mth 53.1), Brazil 53/50.7, Greece 52.6/52.8, Norway 51.92/51.29, Taiwan 51.5/51.1, Hungary 51/50, China 50.8/50.1, Singapore 50.7/50.9, Poland 50.6/48.8, United States 50.3/50.9, Russia 50.2/53.1, Netherlands 50/48.4, South Korea 49.9/50.3, Spain 49.7/50.9, Switzerland 49.6/47.5, Vietnam 49.2/48.9, South Africa 49/47.4, Japan 49/48.7, Hong Kong 49/51, Turkey 48.3/48, Canada 47.8/51.6, Czech Republic 47.7/46.6, Mexico 47.6/49.1, Italy 47.4/46.3, UK 46.9/48.3, Austria 46.7/45.7, Germany 46.5/45, France 45.8/45. Services PMI: India 59/56.5, Spain 56.2/54.9, Japan 53.7/53, Ireland 53.2/53.4, Italy 53/50.4, China 51.4/51, Germany 51.1/52.5, US 51/52.9, UK 51/50.8, Sweden 50.8/50.2, Australia 50.8/51.2, Brazil 50.6/47.6, Russia 50.5/54.6, France 45.3/48.2.

Weekly Close: S&P 500 -3.1% and VIX +3.74 at +23.37. Nikkei -0.7%, Shanghai +1.6%, Euro Stoxx -0.7%, Bovespa +1.8%, MSCI World -1.7%, and MSCI Emerging +2.9%. USD rose +0.6% vs Russia. USD fell -6.4% vs Sweden, -6.3% vs Bitcoin, -4.2% vs Euro, -3.6% vs Chile, -2.7% vs Sterling, -2.4% vs South Africa, -1.7% vs Yen, -1.7% vs Indonesia, -1.6% vs Brazil, -1.5% vs Australia, -1.4% vs Mexico, -0.7% vs India, -0.6% vs Canada, -0.4% vs China, -0.2% vs Ethereum, and flat vs Turkey. Gold +2.3%, Silver +4.2%, Oil -3.9%, Copper +3.6%, Iron Ore -4.3%, Corn -0.1%. 10yr Inflation Breakevens (EU +14bps at 1.92%, US -2bps at 2.35%, JP +6bps at 1.66%, and UK -5bps at 3.39%). 2yr Notes +1bp at 4.00% and 10yr Notes +9bps at 4.30%.

2025 Year-to-Date Equity Index Returns: Poland +25.6% priced in US dollars (+17.6% priced in zloty), Colombia +24.5% priced in US dollars (+16.7% priced in pesos), Austria +22.2% in dollars (+17.1% in euros), Czech Republic +21.5% (+15.5%), HK +20.7% (+20.8%), Germany +20.6% (+15.6%), Sweden +20.1% (+9.9%), Hungary +19.8% (+11.2%), Spain +19.8% (+14.3%), Ireland +19.4% (+14%), Italy +17.8% (+12.9%), Chile +17.5% (+9.9%), Euro Stoxx 50 +17% (+11.7%), Finland +16.5% (+11.7%), Switzerland +16.1% (+12.7%), Greece +16% (+10.7%), France +15.3% (+10%), Norway +12.3% (+7%), South Africa +11.3% (+7.7%), Brazil +10.9% (+4%), Belgium +9.8% (+4.8%), Mexico +9.8% (+6.7%), UK +9.5% (+6.2%), Netherlands +8.7% (+3.7%), Korea +8.5% (+6.8%), Portugal +7.2% (+2.3%), Singapore +6.1% (+3.3%), Israel +4.6% (+3.8%), Vietnam +4.6% (+4.7%), Turkey +3.7% (+6.9%), Denmark +2.7% (-1.5%), China +1.4% (+0.6%), MSCI World +0.9% (+0.9%), UAE +0.3% (+0.3%), Canada +0.1% (+0.1%), Australia -0.9% (-2.6%), Japan -1.5% (-7.5%), Saudi Arabia -1.7% (-1.9%), S&P 500 -1.9% (-1.9%), Taiwan -2.1% (-2%), Philippines -2.8% (-3.5%), New Zealand -3.6% (-5.4%), Malaysia -4.5% (-5.8%), NASDAQ -5.8% (-5.8%), India -6.3% (-4.6%), Russell -6.9% (-6.9%), Indonesia -6.9% (-6.3%), Thailand -12.9% (-14.2%), Argentina -13.6% (-10.7%).

Empire: “You had a large, powerful nation, which was Germany, and for cultural reasons it chose to overlook economics,” said the CIO. “German leaders believed all the nations of Europe should save at the same time,” he continued. “They had a justice-based, retribution-based view of the EU, where southern nations were sinners who needed to pay.” But of course, in modern economics, for every surplus there is a deficit, for every saver a sinner. “The Germans struggled to admit to themselves that their surpluses were fueled by their southern neighbors’ deficits.

Empire II: “The 1930s taught us the cost of simultaneously reducing current account deficits to zero,” continued the CIO. We call that depression. “The Germans inflicted severe economic pain on the southern countries in the 2012-14 period. But these were also Germany’s best customers, so having recovered reasonably well from the GFC, Europe went back into a severe recession that bordered on the existential,” he said. “Bond yields blew out. That was the final straw for the Germans who then turned to Draghi and gave him the greenlight to do whatever it took.”

Empire III: “The US is following a similar path to Germany’s back then,” he said. “Although, there is an even stronger retributional overtone to the US position.” US leaders believe America has been screwed for decades. “Having the world’s reserve currency necessitates a current account deficit to satisfy high overseas demand for dollars.” Running a current account deficit can only really happen with a trade deficit. “The policies to correct these deficits are clearly stagflationary, and the straw that’ll force some kind of U-turn will be a dramatic equity decline.”

Empire IV: “The US is the most powerful nation on earth, no doubt,” the CIO continued. “The source of that power includes having the world’s reserve currency, a growing population largely through immigration, the ability to run deficits with low interest rates, and the fact that it stitched together history’s largest empire on the cheap.” The US did it through a rules-based system of trust, without having to occupy any countries. “So much of that value from the shiny S&P 500 multi-nationals comes from the US world order, controlling the seas, like-minded allies, empire.”

Empire V: “What easy predictions come from what’s unfolding?” he asked, not waiting for my answer. “The American empire as we know it is done, over, complete,” he said. “And while your allies are clearly very unhappy with the turn that the US has taken, your adversaries are not. The Kremlin, the Forbidden City, they’re quite pleased,” he said. “The world is now a far less safe place. Less prosperous too. And we’re transitioning away from a trust-based system to a retribution-based system, something we haven’t seen since pre-WWI, a dog-eat-dog world.”

Anecdote: “There were forty of us, huddled in the middle of Cannon Field, it was absolutely dumping rain,” said Jackson, from Quantico, VA. “Our staff platoon commander had us carry out a heavy sea bag, a cooler of beer, we obviously knew this was the day.” The Basic School is a six-month program focused on developing a foundational understanding of infantry tactics, decision-making under pressure, and the Corps’ warrior ethos, reflecting the principle that every Marine officer is a rifleman first. “I wasn’t freaking out, just anxious, nervous.” Sometime before graduation, unannounced, unscheduled, young officers are assigned the specific role they will hold for the entirety of their career in the Marines. There are 27 possible roles, and each young officer ranks their preferences 1-27. Based on both the individual’s ranking amongst classmates and the needs of the Marines, they get placed. “The staff platoon commander pulled out a brick from the bag with a number printed on it and held it up so we could all see.” Each of the 27 Military Operational Specialty’s (MOS) has a number associated with it that Marines must commit to memory. “The back of each brick had one of our names printed on it. And the staff platoon commander would read out the person’s name and our platoon would go wild.” As we spoke, Jackson texted me a picture of his wet grey brick, proud, 1302, large black numbers, neatly stenciled. And I had a flash of that brick, sitting on his shelf one day, his kids wondering what the number meant, its significance, the path it represented, the story it had started on that cold muddy field. We all have a brick of course, although few ever know the number. And onward we march, so much of life out of our control. “I was one of the last few to get called up. When I saw that number, my heart raced, 1302, Combat Engineer. Then he called my name, handed me the brick, a beer, and it was done.”

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.