I shouldn’t have to say this, but the Kremlin can’t be trusted to honor any Ukraine ceasefire that doesn’t include ironclad US security guarantees for Kyiv.
Because no US guarantees (ironclad or otherwise) are forthcoming with Donald Trump in the Oval Office, no Ukraine ceasefire should be expected to last.
That’s not to say a durable peace can’t take hold, it’s just to state what should be obvious, and is obvious to anyone not deluded by counter-narrative indoctrination: Vladimir Putin covets Ukraine. He wasn’t compelled, NATO gun to Russia’s head, to try and seize it. Nobody “forced” his hand. There was no threat to Russia’s territorial integrity or sovereignty. That’s a lie and an absurd one at that. Putin wanted to install a puppet regime in Kyiv, and he still does. If he doesn’t have to worry about pushback from Washington, it’s more likely than not that he’ll create a pretext to try again eventually.
That simple reality is why I have such a hard time with the bull case for European equities, such as it is. This was the subject of the latest Weekly, so I won’t recapitulate here, but I did want to quickly highlight some color from JPMorgan, whose asset allocation team suggested in their latest that “the ceasefire dividend for the Euro area has been largely priced in year-to-date.”
The figure above’s a quick reminder: European equities saw meaningful inflows over the last two weeks. They may seem small compared to the big flow numbers you’re used to seeing for US-focused equity funds, but for Europe, $6.5 billion in net inflows over two weeks is quite pronounced.
Although JPMorgan conceded that the “strong outperformance of Euro area and Eastern European equities,” along with other cross-asset manifestations of the European peace dividend trade, represent “a challenge” to the bank’s preference for US shares, the dollar and long euro rates bets, they’re not inclined to “ride the positive momentum [in] European assets.”
Why? Well, because in order for that trade to have legs, you need a ceasefire with credible security guarantees, and as noted above, that ain’t happenin’.
The table above is just JPMorgan’s scenario analysis. Obviously, it’s for illustration purposes only.
It’s not just the war. The bank also cited “enduring risk of tariffs, limited room for imminent fiscal stimulus even after the German elections and structural concerns on Japanification” as reasons to doubt the nascent European renaissance narrative.
Notably — and this brings us quickly full circle — JPMorgan was refreshingly forthcoming about the reality of the Kremlin’s thinking and what that reality spells for the future. I’ll leave you with their assessment, presented without further comment:
The political capital the Trump administration put into a quick ceasefire makes the probability of that happening over the next six months quite high, although we remain skeptical on the feasibility of a comprehensive peace agreement with credible security guarantees. The core demands of the conflicting sides are still far apart. Russia’s pre-war goals and its stance during the March-April 2022 talks on Ukraine remain unchanged. Russia seeks to politically subordinate Ukraine, control it by blocking NATO and EU membership, limit its military and install a pro-Russian government in Kyiv. These aims undermine Ukraine’s independence and any potential security deal for its people. Simply ceding land will not satisfy Russia’s core demand, and it’s unclear if the Kremlin is open to any concessions.
The WW3 card is still in play.
Danish intelligence thinks Russia will be ready to attack a neighboring country in 2025, a country around the Baltic sea by 2027, and the rest of Europe by 2030.
Estonian intelligence thinks Russia will be ready attack one of the Baltic countries by 2026.
Ukrainan intelligence thinks Russia may attack Lithuania late this Summer, with exercises in Belarus being a prelude.
I’m not so sure about the 2025 timeframe given that even if there’s a ceasefire next week, a Russsian gamble on a Baltic country is wholly dependent on Article 5 failing, and Putin is desperately looking for respite for his strained economy at present.
Euro stocks should be pretty safe for the next 3 months. Beyond that, mind left tails.
(None of those outcomes are certainties of couse, but they are plausible according to intelligence services.)
(Also do forgive my broken laptop keyboard that randomly drops and inserts key presses. Having the laptop fixed in the countryside on this island is a PITA. A 30 min post edit window would be most excellent.)
Here here to the 30 minute edit window. h, I could use some more consulting work..
Frankly, if I wanted the best quality intelligence on Putin I’d call on the Mossad, although even for the billions we gifted Israel to flatten Gaza, I doubt they’d give us the latest dope.
Perhaps the art of the deal is to limit sale of Russian oil and raw materials to China and isolate them. For that, Russia will have sanctions lifted and unfettered access to their foreign capital. EU makes long term commitments to buy our LNG, so Russian flow of Nat gas into EU will likely still be limited and sanctioned. So any security guarantees are likely to be limited and perfunctory, unless EU commits to buying our LNG and weapons, American companies get concessions to rebuild Ukraine, and all EU tariffs on American imports into EU are eliminated. Russia will get more influence over Ukraine to encourage EU compliance with American requests, …in exchange for providing security. That would likely be an optimal mercantilist policy. And then US could focus their attention on China containment, particularly since live fire naval adventures this past week by Chinese navy off the coast of Australia. Just guessin’.
I’m amazed about how many posters in other forums are pushing the notion that this rare earth mineral deal as well as giving into all of Putin’s demands is part of a masterful chess maneuver designed to box out China. Who in this administration with access to the president might be orchestrating such a plan?
Since Hong Kong was taken back by China with barely any noticeable disruption to the “free world”, then I doubt the loss of Taiwan would cause any noticeable disruption (other than for those unfortunate people who still live there at the time Xi takes it) to the “free world”, either.
Sad, but I think true.
He might wish such undertakings but seeing what has happened already I don’t think he has the resources to overcome any more resistance. I’m not an intelligence pro but Putin’s already sending kids to fight, taking a breather to try to figure out what’s next and just how much aid he’ll get from Trump and Musk.
If the US had really wanted to save Ukraine as soon as this Putin aggression was started, we would have done so- three years ago.
Instead, the US utilized the Ukraine situation to help US military contractors offload older munitions/war supplies so that they could replace their outdated inventory with updated weapons and equipment. On top of that, the US restricted how and where Ukraine could use such munitions/equipment- while we waited (hoped) for Russia to implode.
In hindsight sight, this was a very bad plan and it is not surprising that we are where we are.
Genuinely curious – what do you believe should have been done differently? What would the benefits and risks of a different strategy have been?
The nasty part of decision making is that there are no do-overs or what-ifs allowed. The conditions present when a decision is made will never be the same again. That’s why back-testing is futile. You only get one chance for any decision. Now we have to look at the new conditions and start again with the new context.
We merely need to conjure a companion to the US-sponsored Operation Iron Wall in the West Bank. Operation Ironclad, anyone?