Fat Tails (Macro SWOT Update)

Here is a new edition of the SWOT framework first introduced in November 2022. The last analysis published in mid-2025 observed that any expectation of a return to normalcy had vanished. Today, that verdict holds. As captured by Mohamed El-Erian from the Wharton School, ‘the normal bell distribution has been replaced by one with unusually fat tails.’

The Iran crisis does not feature prominently in the SWOT. This is not a reflection of indifference to the human cost of war. Rather, financial markets have historically treated regional conflicts as economically contained events unless they spill over into systemic variables such as global energy prices, as explained in ‘Markets Have No Mercy’ (2015). While I acknowledge the tone of recent headlines, I do not assign a high probability to a scenario in which the conflict lasts long enough to produce a material global economic shock.

Strengths (in approx. order of importance from high to low)	Weaknesses (in approx. order of importance from high to low)
Resilient global economy cruising at c.3% AI investment super-cycle (40%+ in 2026) Global disinflationary trends Corporate balance sheet resilience Accommodating monetary and fiscal policies India's growth (4th largest economy in ’26) Developing economies growing at 4% GDP Energy transition investments (+11% in 2025) Increasingly resilient supply chains	Anxious consumers Commercial real estate overhang (in the US) China’s growth downgrade and deflation Narrow markets prone to correction hazard Euro area structural weaknesses US LT real interest rates structurally stuck at 2% Political divergences fueling policy uncertainty Geopolitical fragmentation and trade tension US executive-judicial power reconfiguration
Opportunities (in approx. order of importance from high to low)	Threats (in approx. order of importance from high to low)
Short-term (2026/2027)	Short-term (2026/2027)
US tax refunds-driven fiscal boost in H1/2026 Industrial short-cycle recovery (PMI) Accelerating AI enterprise adoption  Germany’s fiscal boost kicking in China anti-involution campaign Japan's fiscal stimulus under the new PM Reshoring impact on the industrial capex cycle M&A recovery: capital allocation efficiency boost GLP-1 tipping point in ‘26 + for productivity Growing use of prediction markets USD weakness positive for emerging market debt	Oil prices (Iran) and energy/inflation shock US tariffs volatility AI-employment decoupling Federal Reserve questioned independence Bond market stress – higher term premia Private credit market undergoing a credit cycle Deteriorating US fiscal trajectory (CBO) Stranded assets b/c of AI causing a financial crisis
Longer term (2028+)	Longer term (2028+)
Ukraine ceasefire and reconstruction Continued AI infrastructure investments Draghi EU report implementation progress AI-triggered singularity and abundance Global South economic growth Apolitical reintegration of sustainability into capital markets and regulation A polarized but more stable and peaceful world	Workforce transformation impact on society AI concentration risk (winner-takes-it-all) Power relations impeding change High global public debt (100% by 2030) Democratic erosion with social unrest Growing physical risk (climate change) Structural costs from deglobalization Demographic drag in large economies

In 2022, the macro picture was presented as ‘reasonably balanced.’ The dominant macro drivers were easily identifiable and largely cyclical: energy prices would normalize, inflation would peak and abate, and China would reopen post COVID. And they all did.

The 2026 matrix shows that significant sources of uncertainty have shifted from the cyclical to the structural: institutional stress in democracies, AI transition, and geopolitical fragmentation.

The upside scenarios are as plausible as the downside ones. Fat tails cut both ways. The mean has not moved. It has simply become much less relevant.