Behind the chaos – finding meaning in markets

It was once said that there are decades where nothing happens and then there are weeks when decades happen. Going by that adage, we have seen what seem like decades happening in the last few weeks.

But Nate Silver’s book The Signal and the Noise highlighted the need to look beyond the headlines and the “noise” and to the underlying trends and actions that provide the “signal” that helps us to make better decisions.

There’s also lots of news flow on the artificial intelligence (AI) front, highlighted the launch of China’s competitor to OpenAI’s ChatGPT, called DeepSeek. DeepSeek seems to have been built at a fraction of the cost of ChatGPT, while it also appears to be part of what is turning into a “tech war” between China and the US, alongside the developing tariff war.

Locally, this postponement of the 2025 Budget Speech has thrown the fiscal cat among the pigeons and we will now have to wait until 12 March to see whether the parties in the Government of National Unity can iron out their differences.

Look beyond the “noise” and a few underlying trends appear to be emerging:

1. Deregulation and “small” government

Once again, the noise has been about Musk’s attacks on US government agencies. Behind it is a concerted drive towards smaller government that has now been picked up even by countries known for their large government sectors and red tape. We have already seen calls for simplifying banking rules in Europe and for UK regulators to cut red tape. Certainly, a space to watch.

2. Looking beyond war

Quite what sort of peace package emerges in Ukraine is unclear, but it does seem likely that a peace agreement will be reached. The implication of this is that some sort of Marshall Plan will be implemented for a post-war Ukraine, driven by European contractors. European countries will also likely face increasing defence budgets in the years ahead. Will this precipitate a Keynesian-style capex boom?

3. The impact of tariffs

There’s barely a country or sector that hasn’t been threatened with US tariffs. Many of these will materialise, but others could lead to further rounds of negotiations between the US and its trading partners and to new agreements on trade. Other countries will also look at their arrangements with other partners, or even internally.

Former European Central Bank President Mario Draghi recently wrote in the Financial Times that different VAT rates and other taxes within the European Union have effectively amounted to internal tariffs, while Canada has been looking at some of the barriers to trade that exist between the different provinces. 

4. Inflation

Typically, a high tariff world is inflationary, as producers of goods are protected from competition from elsewhere in the world. Central banks will be watching closely how tariffs have an impact on prices. As noted above, should countries be able to reexamine their existing policies and streamline trade policies, it could be beneficial for global trade.

5. Trump-Musk: Opportunities out of chaos?

The Trump-Musk strategy of “move quickly and break things” could create an opportunity for investors looking for ways to mitigate the US-led chaos, either by being less unpredictable partners or safe havens.

Examples include the European Union, which could offer alternatives to US Treasuries, or China, as it forges ahead with AI offerings of its own.

These opportunities could become ever more attractive in the light of high valuations of US technology counters (including Nvidia and the rest of the Magnificent Seven) or as US tariffs lead to higher US inflation or hamper US growth.

In conclusion, these are unpredictable times, but for investors prepared to look behind the headlines and discern the underlying trends, it offers significant opportunities.