Army’s helicopters crossed the 50-yard line slow and low. Thump, thump, thump. The stadium went wild. Eight thousand Naval Academy and West Point cadets. Navy’s jets tore the sky in two, the sound of freedom. The crowd roared. I had flown back from a quick European tour, our family not quite all together again, my oldest deployed to the southern border. The Army/Navy football game is a day everyone should experience at least once, there’s no sport event quite like it [here]. The rivalry within our family is extreme, with Jackson a Marine now, Liv and Teddy at Army, and the three of them fighting over Charlie’s undecided future path.
Overall: Cisco finally regained the old all-time high. It took 25 years. In March 2000, the network equipment maker surpassed Microsoft to become the world’s most valuable company. Julian Robertson published his final letter for Tiger Management that week, writing, “The difficulty is predicting when this change will occur and in this regard I have no advantage. What I do know is that there is no point in subjecting our investors to risk in a market which I frankly do not understand. Consequently, after thorough consideration, I have decided to return all capital to our investors...” The inexorable rise in tech/growth stocks relative to value stocks had reached a point where even the mightiest investors of the time were brought to their knees. Every great trader knows that the most powerful bull and bear markets rise and fall to such a point where nearly every sober-minded contrarian concedes defeat. Which makes it all the more extraordinary that even the most brilliant investors, armed with their armies of analysts, steeped in market history, nevertheless succumb to capitulation near market turns. It has always been so and will forever be. Markets are superorganisms, drawing strength from every participant willing to play. They are humanity’s first form of Artificial Superintelligence. And as such, markets manage to outwit even the geniuses amongst us. Anyhow, Oracle got smoked this week. If Nvidia is this cycle’s coalmine, Oracle is the canary. In both stocks, investors convince themselves that they can see reflections of past crises. Most of today’s investors have only read about the great booms and busts of previous generations. And with the passage of time, such historical cycles appear simple, obvious even. Which allows us to trace neat parallel lines between then and now. But of course, this is one of the most surefire ways that an Artificial Superintelligence deceives, before knocking us to our knees.
For Week-in-Review and Weekly & Year-to-Date market data, scroll to the bottom.
MAGA: I remember 2017 well. It brought me to one knee. Trump had won the election in late 2016. The world braced itself for the chaos that was to come. Of course, we should all have known better. That’s not how markets work. Only rarely does an Artificial Superintelligence give investors extraordinary profits without inflicting ungodly pain. When it does give unearned gifts, it is to tempt us to foolishly bet on the obvious in some future market cycle. No ASI would ever operate in consistently predictable ways. Anyhow, over the course of 2017, the beginning of America’s MAGA experiment, here’s what happened in markets:
Dec 31 2016 - Dec 12 2017: S&P 500 +19.0% and VIX -4.12 at +9.92. Nikkei +19.6%, Shanghai +5.7%, Euro Stoxx +8.4%, Bovespa +22.6%, MSCI World +19.0%, MSCI Emerging +29.0%, Bitcoin +1711.8%, and Ethereum +8063.3%. USD rose +9.2% vs Turkey, +2.1% vs Brazil, and +0.7% vs Indonesia. USD fell -10.4% vs Euro, --7.4% vs Mexico, -7.3% vs Sterling, -5.2% vs India, -4.7% vs China, -4.6% vs Australia, -4.3% vs Canada, -3.8% vs Russia, -2.9% vs Yen. Gold +6.2%, Silver -3.9%, Oil +0.3%, Copper +19.7%, Iron Ore -20.1%, Corn -10.6%. 10yr Inflation Breakevens (EU +3bps at 1.28%, US -5bps at 1.92%, JP -12bps at 0.47%, and UK +5bps at 3.07%). 2yr Notes +64bps at 1.83% and 10yr Notes -4bps at 2.40%.
MAGA II: In 2017, the stock market grinded higher all year in an unprecedented fashion, so that by Dec 12, 2017, the VIX was below 10. Investors sold volatility aggressively, and the more they sold, the lower the VIX fell, reflexively. Which created the conditions for a series of volatility spikes that climaxed in Covid. In this first year of Trump II, we endured Independence Day, the VIX index hit 60, and we suffered so many policy flip flops that they barely affect the market at this point. Here’s how markets have done in the second stage of America’s MAGA experiment:
Dec 31 2024 - Dec 12 2025: S&P 500 +16.6% and VIX -1.67 at +15.68. Nikkei +27.4%, Shanghai +16.1%, Euro Stoxx +14.3%, Bovespa +32.8%, MSCI World +19.9%, MSCI Emerging +28.0%, Bitcoin -2.5%, and Ethereum -4.0%. USD rose +20.8% vs Turkey, +5.6% vs India, and +3.3% vs Indonesia. USD fell -29.9% vs Russia, -16.1% vs Sweden, -13.3% vs Mexico, -12.3% vs Brazil, -11.8% vs Euro, -6.8% vs Australia, -6.3% vs Sterling, -4.2% vs Canada, -3.3% vs China, and -0.9% vs Yen. Gold +55.0%, Silver +101.7%, Oil -15.6%, Copper +28.8%, Iron Ore +1.3%, Corn -2.5%. 10yr Inflation Breakevens (EU +2bps at 1.79%, US -7bps at 2.27%, JP +31bps at 1.78%, and UK -50bps at 3.01%). 2yr Notes -71bps at 3.53% and 10yr Notes -39bps at 4.19%.
MAGA III: There is so much more to America than its politics. At its core, America is the greatest business enterprise the world has ever known. Politicians fight over the fair distribution of its spoils, while engaging in international policy experiments that shift from generation to generation. It appears we’ve entered a phase that’s more focused on the Western Hemisphere than Europe and Asia. Investors will look to historical periods for parallels. Perhaps they’ll find some that prove helpful. Definitive. I’m of the mind to keep mine open, searching our Artificial Superintelligence for signals, signs. Here’s how markets have performed since the start of America’s MAGA experiment in late 2016:
Dec 31 2016 - Dec 12 2025: S&P 500 +207% and VIX +1.41 at +15.45. Nikkei +166%, Shanghai +26%, Euro Stoxx +61%, Bovespa +166%, MSCI World +154%, MSCI Emerging +60%, Bitcoin +9497%, and Ethereum +40147%. USD rose +1111% vs Turkey, +67% vs Brazil, +36% vs Chile, +33% vs Yen, +33% vs India, +29% vs Russia, +24% vs Indonesia, +23% vs South Africa, +9% vs Australia, +3% vs Canada, +2% vs Sweden, and +2% vs China. USD fell -13% vs Mexico, -10% vs Euro, and -8% vs Sterling. Gold +271%, Silver +288%, Oil +0.5%, Copper +115%, Iron Ore +21%, Corn +14.4%. 10yr Inflation Breakevens (EU +54bps at 1.79%, US +30bps at 2.27%, JP +119bps at 1.78%, and UK -1bp at 3.01%). 2yr Notes +235bps at 3.54% and 10yr Notes +174bps at 4.18%.
Anecdote: “Let me tell you a familiar story,” I said, discussing market risks, opportunities, in Stockholm this week. Early in my career, Sweden hit the wall. Decades of economic math that hadn’t quite added up had compounded to a point where a market unwind was unavoidable. As the crisis climaxed in late 1992, the central bank hiked overnight interest rates to 500% to punish speculative short-sellers of kronor. We made a small fortune in that market chaos. That was my first of many crises. Every one looked different. In each, investors, high and low, were brought to their knees. Some combination of overleverage, overreliance on parallels to the past, intellectual overconfidence, inadequate risk management, and lack of a sufficiently expansive imagination, is to blame. With each successive crisis since my start in 1989, central bankers and politicians intervened ever more aggressively to forestall economic cleansing, borrowing from the future to repay the past and secure the present. Such interventions have transferred risks and excesses from individuals and corporations onto the government balance sheet. The math of our federal debts and entitlement commitments no longer adds up. The consequences are compounding. I suspect that before my career is over, a sovereign crisis like Sweden’s in 1992 will erupt in the US. The only practical way to forestall this is through a productivity boom that materially lifts non-inflationary growth and repays our policy sins. This is why the US government is all in on the AI buildout. If AI fails to deliver on its vast promises, the risk is far wider than the tech sector. It will lead to a deep recession and massive budget deficits, which will catalyze a debt sustainability crisis that could make 2008 seem trivial. Sovereign debt crises are the most devastating of all financial calamities, because the buyer of last resort is the one in trouble. But I suspect that the AI boom doesn’t end neatly with Cisco retaking its 2000 highs, as it did this week. The parallels with the dot com boom/bust are all too evident and well publicized at this point. Which means we should still be long this bull market, while also running substantial downside hedges. Positioned for a world with two big fat tails.
Good luck out there,
Eric Peters
Chief Investment Officer
One River Asset Management
Week-in-Review: Mon: China trade surplus hits $1trln for first time. China exports 5.9% (4.0%e), imports 1.9% (3.0%e). Japan GDP ann QoQ -2.3% (-2.0%e). Australia cash rate target unch 3.6% as exp. Paramount launches hostile takeover bid for Warner Bros, days after Warner Bros agrees to deal with Netflix. Trump grants Nvidia approval to sell H200 AI chips in China. Trump announces he will approve an executive order establishing “one rule” on AI, aimed at limiting state-level regulations. S&P -0.4%. Tue: Mexico CPI 3.8% (3.7%e). China CPI 0.7% as exp, PPI -2.2% (-2.0%). Japan PPI 2.7% as exp. SpaceX to pursue 2026 IPO, seeking to raise over $30b. Trump to begin interviewing Fed Chair candidates this week, with White House National Economic Council Director Kevin Hassett the frontrunner. S&P -0.1%. Wed: The Fed trimmed rates by 25bps, marking its third consecutive cut, with policymakers maintaining their outlook for just one reduction next year. US FOMC rate decision upper bound 3.75% as exp, lower bound 3.50% as exp. Canada rate decision unch 2.25% as exp. Russia CPI 6.64% (6.76%e). Australia unemp rate 4.3% (4.4%e). Mexico approved tariffs as high as 50% on Chinese imports. S&P +0.7%. Thu: US init jobless claims 236k (220k e), cont claims 1838k (1938k e). US trade balance -$52.8b (-$63.1b e). Ukraine key rate unch 15.50% as exp. Zelensky said the fate of Ukraine’s Donbas region may be put to a vote as Kyiv comes under mounting pressure to agree to peace plan. Disney agreed to invest $1b in OpenAI and license characters to OpenAI’s video platform Sora. S&P +0.2%. Fri: Mexico IP NSA -0.4% (-2.0%e). Germany CPI 2.3% as exp. China Money Supply M2 8.0% (8.2%e). US envoy Steve Wikoff to meet Zelenskiy and European leaders in Berlin to discuss peace plan. US Fed dissenters Goolsbee and Schmid will be rotating out of the voting roster in 2026, with Goolsbee expressing concerns for inflation and projecting more cuts in 2026, while Philadelphia Fed Paulson, who will be rotating in, expressed stronger concerns about labor market weakness. S&P -1.1%. Sat: Navy football beats Army 17-16.
Weekly Close: S&P 500 -0.6% and VIX +0.33 at +15.74. Nikkei +0.7%, Shanghai -0.3%, Euro Stoxx -0.1%, Bovespa +2.2%, MSCI World -0.2%, MSCI Emerging +0.3%, Bitcoin +0.7%, and Ethereum +1.4%. USD rose +4.6% vs Russia, +0.5% vs India, +0.3% vs Turkey, and +0.3% vs Yen. USD fell -1.7% vs Chile, -1.3% vs Sweden, -0.9% vs Mexico, -0.8% vs Euro, -0.6% vs Brazil, -0.3% vs Canada, -0.3% vs Sterling, -0.3% vs South Africa, -0.2% vs China, -0.2% vs Australia, and flat vs Indonesia. Gold +2.0%, Silver +5.0%, Oil -4.4%, Copper -1.9%, Iron Ore +0.9%, Corn -0.9%. 10yr Inflation Breakevens (EU +1bp at 1.79%, US +1bp at 2.28%, JP +3bps at 1.78%, and UK +1bp at 3.01%). 2yr Notes -4bps at 3.52% and 10yr Notes +5bps at 4.19%.
2025 Year-to-Date Equity Index Returns: Colombia +77.1% priced in US dollars (+52.9% priced in pesos), Korea +73.3% priced in US dollars (+73.7% priced in won), Czech Republic +70.9% in dollars (+45.9% in koruna), Israel +70.9% (+50.3%), Chile +69.1% (+55%), Hungary +66.7% (+38.2%), Spain +65% (+45.4%), Poland +63.6% (+43%), Greece +62.5% (+43.2%), Austria +57.5% (+39.3%), South Africa +57.2% (+40.3%), Brazil +52.9% (+33.7%), Mexico +51% (+30.7%), Ireland +49.7% (+31.8%), Italy +43.9% (+27.3%), Finland +42% (+25.6%), Portugal +41.8% (+24.9%), Germany +37.3% (+21.5%), Sweden +35.1% (+13.6%), Canada +33.3% (+27.5%), Belgium +32.7% (+16.9%), Euro Stoxx 50 +32.6% (+16.8%), Norway +31.5% (+17%), HK +29.2% (+29.5%), Taiwan +28.7% (+22.4%), Japan +28.5% (+27.4%), Singapore +28.2% (+21.1%), Switzerland +26.4% (+11.1%), UK +26.1% (+18.1%), Vietnam +25.9% (+30%), France +24.1% (+9.3%), Netherlands +21.4% (+6.9%), NASDAQ +20.1%, China +20.1% (+16%), Indonesia +19% (+22.3%), MSCI World +18.9% in dollars, S&P 500 +16.1%, Australia +14.7% (+6.6%), Russell +14.4%, Malaysia +8.9% (-0.3%), New Zealand +6.1% (+2.3%), UAE +6.1% (+6%), India +4.1% (+10.2%), Thailand -2.9% (-10.4%), Turkey -4.7% (+15.1%), Philippines -9.3% (-7.5%), Saudi Arabia -10.9% (-11%), Denmark -14.3% (-24.1%), Argentina -15.9% (+17.6%).
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.