The habit of spending long periods underground before re-emerging is not limited to the Cicada, for while this year sees the coincidence of the 13 year year Cicada cycle and the 17 year one, something that last happened 221 years ago, it is also 17 years sine Tony Blair was last in power and 13 since Francois Holland (likely PM in the French Hung Parliament) was. Both now look to be re-emerging to ensure continuity of policies that never really went away. The key sources of protest across Europe - crippling expensive wars against Russia and Climate change as well as uncontrolled immigration have only been addressed in the doubling down - the first thing UK PM Starmer did was fly to Washington to offer more money to NATO, while his Chancellor promised more money for Net Zero. Meanwhile, the left alliance put together to thwart Le Pen is even more pro immigrant than Macron. For markets, there is no prospect of lower spending and every prospect of higher taxes - the only 'Change' visible but not the one promised. The Technocrats and Globalists expecting this 'democracy' means that the populous will go quietly will be disappointed, especially with the arrival in the Autumn (once the Cicadas have gone) of the great populist, anti open border, anti net zero and anti war populist Donald Trump.

The scorecard for the first half puts Equities, commodities and Gold in the top half of the table, with cash and fixed income in the lower half. This is consistent with the steady but uninspiring macro backdrop and positioning ahead of a tricky H2 from a political perspective. The anomaly of the Market Cap weighted SPX out-performing the equal weighted SPW by over 10% points tells us both that the SPX is no longer telling us anything about the US economy and that this excess return is for taking (considerable) concentration risk. Meanwhile, with Bond analysts 'pivoting from the Pivot' the fixed income markets have calmed down a little and leaving The Donald' rather thna 'The Fed' as likely the biggest policy influence on Markets over the next 12 months. In particular, we would look out for a 'Trump Plaza Acord" early next year, 40 years after the last one- something the FX markets aren't talking about, but the asset allocators seem to be (at least subconsciously) pricing in.

While western policy makers try and 'simulate growth' by fixing prices - of money, energy or the exchange rate - emerging economies like China are pursuing policies of creative destruction, allowing industries to boom and then deliberately collapsing part of them when their purpose has been served. The Property developers were the latest example. Focusing on the 'destruction' rather than the 'creative' side of the policy means the west is constantly seeing China in crisis. When it isn't.

Passive and Semi Passive managers are only controlling for benchmark and volatility risk. To the extent that active managers are also controlling for the risk of loss of capital they will generally take less risk and thus generate lower returns - by design. Thus the argument that active can’t beat passive is mis-specified. The closer we move to the underlying investor the more important it is to control for risk of loss of capital rather than risk of loss of job and thus the more value can be added by active managers.

Markets are range trading, with traders reducing exposure ahead of a likely volatile summer. Currency markets in particular are looking for catalysts for directional moves to come from politics, with Europe, the UK and the US all having Elections in the coming months. The biggest tail risk we see is from a New White House revisiting the Plaza accord or 1985 and actively talking down the Dollar. Interestingly, while the currency traders are not about talking this at the moment, some of the obvious tail risk hedges - diversification away from $ assets, EM, Gold, Commodities - are already starting to perform.