Blain’s Morning Porridge Dec 12th, 2025 – Outlook 2026: Conflict or Trade?

“The earth is littered with the ruins of empires that once believed they were eternal.”

2026 Outlooks contain rosy predictions for stock market upside, calmer bond markets, the triumph of AI, and even a few who still say Bitcoin will rule us all. But the major Macro risk will be global trade – what happens as China and the USA face off? Trump has fractured the Western Alliances even as China’s trade and military strength give it all the options. What will Emperor Xi choose to do?

It is the time of the year for guessing what might happen next….  

I have no crystal ball. All I can do is perceive the world through a glass, darkly – based on insights from friends and clients (who are often both). This morning I’m going to paint a Global Macro scenario that is already in play – triggered by Trump’s careless unravelling of the Western Alliances. If it plays through, it will utterly change markets.

It’s one I personally believe will set a tone of heightened market risk for the coming years. There are three critical ingredients to this outlook:

• China – Options
• Europe, Japan and Korea – Capacity, Intent and Deterrence
• Global Trade or Global Conflict

You will notice America does not feature. President Trump has played his hand and accelerated the coming economic and, perhaps, kinetic conflict. What matters now is how other nations now play the cards they’ve been dealt in the Great Game of Geopolitics.

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