In the Grim Dark of the Future there is only War....

Market cycles, wars and the end of easy assumptions

Israel and Iran

Associates will know that I was expecting Israel to attack Iran to try to facilitate regime change. My rationale was that after the destruction of Hamas, and more importantly, Hezbollah, Iran knew it now had to accelerate its progress towards building an atomic weapon.

For Israel, this was an existential risk and could not allow that to happen. They had a tight window in which to act, and crucially, it also had a US President who might be open to them attempting a regime change through military action.

I thought there were different ways to position for this, one of which was via US LNG-linked investments. First, energy imports from the US were one of the few ways countries could improve their trade balance with the US, at least optically. Secondly, due to the Ukraine war, Europe has become significantly more dependent on LNG imports from the region; therefore, these investments, along with others, have positive convexity to rising geopolitical risk.

So far, so good at least in portfolio positioning. Not so much in terms of human suffering.

But I believe that the rising geopolitical risk warrants greater attention from investors, and I explain why:

“History is a cyclic poem written by time upon the memories of man.” P.B. Shelley

Markets don’t move in straight lines—they move in cycles. Investors obsess over the familiar: booms, busts, interest rates, liquidity. But beneath that noise lies a deeper rhythm—long waves of societal change, generational turnover, and, at times, systemic conflict.

To ignore that broader context is to mistake the volatility of a major regime shift for randomness.

If you're watching closely, the world is shifting again. The question is not if we’re in a cycle transition, but what kind of cycle we’re in.

The Rhythmic Pattern of Markets

Classical economic cycles follow a familiar arc:

• Expansion, driven by easy credit and confidence

• Euphoria, as valuations detach from reality

• Contraction, triggered by tightening or an external shock

• Despair, then eventual recovery

These are primarily driven by psychology and liquidity. Most experienced investors understand this, and even some 31-year-old podshop PMs are beginning to grasp it.

But these shorter cycles sit within longer arcs—civilisational cycles, less about inflation and GDP, and more about power, legitimacy, and war.

“There is no avoiding war; it can only be postponed to the advantage of others.” Niccolo Machiavelli

The idea of a 'war cycle' is more contentious among economic historians. It broadly refers to two related hypotheses:

1. Major wars tend to occur systematically at specific points within long economic cycles.

2. That wars themselves drive distinct, predictable economic cycles.

Arguments for a 'war cycle' often point to correlations:

• Economic Precursors: Some argue that severe economic depressions (like the Great Depression) create social and political instability, fostering nationalism, protectionism, and a desperation that can escalate into conflict (e.g., World War II).

• War as Stimulus: Wars undeniably prompt massive government spending, leading to full employment, industrial mobilisation, and rapid technological advancements (e.g., the post-WWII boom). This can pull an economy out of recession, suggesting war as a powerful, albeit destructive, economic catalyst.

Moving forward on the assumption that the war cycle hypothesis is valid, it’s worth considering how two contemporary strategists see this fitting into the ‘bigger picture’.

The Fourth Turning: The Generational Reset

In The Fourth Turning, William Strauss and Neil Howe argue that history moves in 80–100 year cycles, driven by generational archetypes. Each “saeculum” ends in a crisis, or “Fourth Turning,” where institutions collapse or are violently remade.

The last cycle culminated in World War II. They predicted the next would begin around 2005–2010.

Right on cue: the Global Financial Crisis, followed by rising populism, institutional decay, and geopolitical fragmentation. We are now deep into the Fourth Turning—and likely nearing its climax.

David Murrin and the Empire Cycle

My good friend, David Murrin, lays out in Breaking the Code of History a five-stage model of empire:

1. Regionalisation

2. Expansion

3. Maturity

4. Overextension

5. Decline

By Murrin’s read, the West—especially the U.S.—is in decline. China is ascending, fast approaching strategic parity. Conflict, in this framework, is not random—it’s the mechanism of transition between hegemonies.

Today’s Flashpoints Aren’t Isolated

The current geopolitical landscape fits all too well within this framework:

• Ukraine: A full-scale land war in Europe. Not just a Russia–Ukraine dispute, but a NATO-inflected proxy conflict.

• Middle East: Widening instability, with Iran, Israel, and Gulf states on a collision course. U.S. influence is thinning.

• China and Taiwan: A deliberate military buildup, mirrored by the West’s reorientation toward Indo-Pacific containment.

• Global rearmament: Defence budgets are on the rise. Western nations are quietly trying to reindustrialise. Deterrence is the new dividend.

This is not geopolitical noise. It’s systemic reordering.

What This Means for Markets

1. Volatility is structural now, not cyclical

Forget smooth reversion. War cycles create fat tails. Markets are increasingly prone to a major regime change, not just price corrections.

2. Real assets are strategic again

Energy, defence, food, and metals aren’t just inflation trades. They’re national security assets. Capital is beginning to rotate accordingly.

3. Fiat is fragile

Conflict and currency debasement often go hand in hand. Fiscal discipline disappears in war cycles. Gold (and possibly, just possibly, bitcoin) isn’t just a store of value—it’s a hedge against institutional decay.

4. Jurisdiction matters again

Where your assets are held is as important as what they’re in. In an era of sanctions, capital controls, and weaponised finance, diversification means crossing borders.

5. Crisis begets reinvention

The period following World War II saw the most explosive global growth in history. But you had to survive the collapse to benefit from the rebuild. That’s the hard truth.

Read the Map, Not Just the Clock

Cycles matter—but not just the ones printed on FRED charts.

The deeper cycles—the generational, the geopolitical, the imperial—shape the risk landscape in ways no spreadsheet can quantify. They determine not just what goes up or down, but what rules apply.

We are not in a typical correction. We are in a systemic transition.

You don’t need to predict the next war. But you do need to be positioned for a world where peace is no longer the baseline.