Merlin Weekly Macro: Trump’s mixed signals fuel volatility

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“Clear, Loud and Precise!”

CLAP! The military axiom for how to give orders. Much the same can be said about effective communication, certainly the clarity and precision parts. Clearly there must be substantive strategy behind it, but one of the essential weapons of war is effective communication. It is the art of knowing what to say and when. As important is knowing when to say nothing.

Until the turn of the 20th Century, war reporting was determined by the speed of the fastest horse or ship to convey news back home; remote from the battlefield, sometimes continents or oceans away, the ability of politicians either to meddle in military campaigns or direct them was negligible; commanders on the spot had their orders with delegated authority to get on with it. That had perceptibly changed by 1914, notably with the development of radio transmission and telephony. Wars today could not be more different: no matter where any conflict is, instantaneous video technology live streams visible evidence on to our phones, laptops and wide-screen tellies. Editorial selection and social media manipulation can be used to twist the narrative from factual reporting to support propaganda or to incite subversive political agendas. Unlimited, wall-to-wall analysis of varying quality and objectivity is all pervading; politicians are wedded to social media and have instant access to military commanders at every level anywhere on the planet.

Effective war communication is about imparting surefootedness and confidence, unequivocal purpose and progress, with tempered realism. Churchill was master of his trade with his wartime oratory: “What is our aim? Victory—victory at all costs, victory in spite of all terror, victory, however long and hard the road may be". Mrs Thatcher led the national mood with “Rejoice!” in the Falklands war in 1982 following the recapture of South Georgia from the Argentinians; Ian McDonald, the understated MoD press spokesman became an unwitting star in that same campaign with his deliberately deadpan daily briefings.

Netanyahu and Trump’s wildly differing approaches

The Iranian conflict is a 24 hour-a-day running reportage and what seems to be the political need to maintain a constant running narrative at the top. The differences in approach and success are instructive and stark.

Compare and contrast: Benjamin Netanyahu’s briefings are typically tight, controlled, concise and uncompromising, seamless with those of his military press officers; they leave no doubt as to the objective.

On the other hand, like a moth to a lantern, Donald Trump cannot resist the twin lures of his Truth Social account and any lectern in sight with a microphone. Verbally, seemingly unrehearsed and unprepared, what issues from the mouth of the Commander-in-Chief is unfailingly meandering and incoherent. War is a serious business: if Trump’s mind is random on the subject, nor does war lend itself to the hysterical and hyperbolic rantings of his War Secretary Pete Hegseth (sometimes the wheels fall off spectacularly: here in the UK, LBC radio host and inquisitor Nick Ferrari has a well-earned reputation for laying elephant traps which devour politicians whole; with his eyes wide shut, the hapless Defence Secretary John Healey recently fell in headfirst with a toe-curling car-crash interview about the state of the Royal Navy; a propaganda gift to our foes, for that interview alone demonstrating his complete lack of grip on both his facts and his brief, he should have been sacked).

In a month, Trump’s war aims have variously included regime change and revolution; unconditional surrender; obliteration of Iran’s military nuclear programme; curtailment of Iran’s ballistic missile capability and capacity; and re-opening the Straits of Hormuz (which were only shut after Israel and the US attacked Iran). Flip-flopping, he wants to do a deal one day; he doesn’t need to do a deal the next; he will operate the Straits jointly with Tehran, changing to a position in which the Straits are everyone else’s problem not that of the US. (aside from Iran’s Gulf neighbours, China has the greatest vested strategic interest in the region; while remaining inscrutably silent, it would be incredible were China not actively planning not only how to protect its interests but how to exploit the upheaval in the balance of power to its own advantage). As for the Iranian populace, far from “we are coming to your rescue” three months ago, they are now incidental collateral damage and seldom mentioned. If the US and Israel began this offensive as brothers in arms, they may yet be on divergent paths if the US packs up and goes home.

The Trumpian wartime public persona is a mass of contradictions and a mess of incoherence. Is this a deliberate, clever if highly unorthodox smoke screen to keep Iran and the rest of the world guessing? Or is the fog seemingly pervading the President’s mind real and his effervescent musings reflect the true state of US military strategy as determined by the C-in-C?

Iran is vastly outgunned; it has been far from outwitted. Fighting an asymmetric war for which it had long prepared and fully understanding the geostrategic and geoeconomic stranglehold it can impose through control of the Straits of Hormuz, Iran might be down but it is not out. Iran is now threatened with being “bombed back to the Stone Ages where they belong”. The US has amazingly sophisticated military power; however, with its predictably unimaginative crash-bang-wallop approach to prosecuting war, it remains equally amazingly unsophisticated in its strategic application. As was the case with Putin in Ukraine, blitzkrieg and shock-and-awe tactics were supposed to see the opposition fold immediately; as the saying goes, “even the best military plans seldom survive first contact with the enemy”. In both cases, the enemy failed to appreciate the script.

Ideologically, Trump is at war with NATO  

Trump may or may not still be at war with Iran by the time of the annual NATO summit in three months’ time. Even if concluded, there exists a state of open political warfare between Trump and his putative NATO allies; unless there is a radical thaw and a fundamental re-set in inter-allied relations, the Ankara Summit scheduled for 7-8 July has the potential to be not only a rancorous but potentially explosive and a deeply damaging affair.

In his recent geopolitical analysis, "Peace and Perversion” , Alastair Irvine, Jupiter Merlin Investment Director and author of both that and this current article, by-lined the chapter on NATO, “Autocracy, Alliance or Anarchy?”. Relations were already sour, particularly after the publication of Trump’s National Security Strategy last November, his declaration to annexe Greenland followed by his cheerfully and mischievously rubbing salt in open wounds with his highly corrosive, excoriating homily delivered at the World Economic Forum in Davos in January.

In February, less than three weeks before Trump’s bilateral assault on Iran with Israel, America’s Under Secretary of War for Policy, Elbridge Colby, made a measured and thoughtful speech at a NATO Defence Ministerial forum. “The world that shaped the habits, assumptions, and force posture of NATO during the so-called ‘unipolar moment’ following the Cold War no longer exists. Power politics has returned, and military force is again being employed at a large scale”, he said.

The essentials of Colby’s thesis are 1) with multi-polar threats that are constantly growing, the US has too many challenges to cope with on its own and must focus on what really matters to it; 2) in keeping with the NATO and US doctrine of “burden sharing”, Europe must take primary responsibility for its own security and pay for it; and 3) NATO 1.0, as defined and structured by the post-1945 Cold War, must be recreated as NATO 3.0, an updated form appropriate to see off the threat posed by state-on-state war, replacing the post-Cold War NATO 2.0 designed for light, low intensity, out-of-area operations which today are the least of the risks facing the West. “At the same time” he went on, “the United States must - and will - prioritize those theatres and challenges where only American power can play a decisive role, as the National Defence Strategy lays out. That is not a retreat from Europe. It is, rather, an affirmation of strategic pragmatism and a recognition of our allies' undeniable ability to step up and lead on Europe's defence in a way that leaves all of us stronger and safer. By leveraging our respective strengths and specializing in areas where we are best positioned to act, we can build a more balanced, effective, and resilient Alliance.”

Less than two months later, such pragmatic sentiments are potentially in tatters. To be clear, the offensive against Iran was not NATO’s initiative: NATO is explicitly defensive, there was no treaty-bound obligation to collude with America and Israel in their joint venture. However, the facts have changed. The Straits are shut and a global supply-side shock is the result with consequential economic insecurity; there can be little argument that getting them open again is in everyone’s best interest.

Trump has been underwhelmed variously at the indolence, reluctance, obtuseness and in some cases downright hostility of his allies to ensure the restoration of the safe passage of shipping in the Gulf, the Red Sea and the Indian Ocean. On the strength of which, he is now threatening a full-scale US withdrawal from NATO at a time when Europe is least capable of defending itself (which arguably hands political leverage to President Zelensky given the bulk of Russian forces are currently “fixed” in Ukraine and therefore not an immediate threat to NATO’s eastern front territories). The Ankara talks will focus heavily on that commitment agreed last year in The Hague and will seek to nail down firm financial spending plans and timelines (i.e. hard cash, not just percentages of GDP, the 3.5% + 1.5% = 5.0% formula split between “core defence” and national resilience infrastructure).

Trump is already suggesting a “pay and play” approach. He would be doing all members a favour if, not only focusing on those GDP percentages and cash spending, he also insisted on an official audit of defence spending effectiveness and efficiency from every member: literally, how much bang NATO gets per buck of expenditure jointly and severally. Too many countries (and the UK is in the unfortunate vanguard of defence delinquency) cheat the system with smoke-and-mirrors accounting and an egregious propensity to waste both time and money that makes their nominal contribution appear far greater than the effect it produces. The only ones they are deluding are themselves. Political leadership, financial commitment and defence procurement remain NATO’s Achilles heels. If Ankara respectively repairs, ensures and reforms all three, it will have taken a great step forward towards NATO 3.0 becoming a reality and Europe becoming safer.

But the first and only immediate priority in Europe’s and America’s mutual security interests is keeping America in.

Starmer’s “Love Actually” moment without the happy ending

Trump has the UK firmly in his sights politically and militarily. He sees us as feckless and faithless on both counts. Starmer has won kudos from his back benchers appearing to stand up to Trump over Iran. It is a Pyrrhic delusion. The government gives Trump more ammunition as it constantly vacillates and obfuscates about meeting the 3.5% + 1.5% of GDP to which it has already agreed. The reality is that defence is not high on the list of political priorities and Labour is less than committed to achieving even the absolute minimum required by NATO to keep us safe, even assuming the US remains fully on board. Without the Americans, for the immediate future Europe, the UK and Canada are taking a big risk of being found swimming naked when the tide has gone out.

Riding the waves of volatility 

As we break for Easter, towards the end of the fifth week of conflict in the Gulf, febrile markets are weighing Trump’s every word. They are unsure what to make of any of them. Volatility remains the order of the day with commodity prices, equity and bond indices lurching in both directions as hopes are raised and dashed for a resolution. Investors hope that Donald Trump means what he says, that the “war will be over in two to three weeks”. With the threat of more rain from Hell, negotiations to bring the conflict to an end are alleged by the Americans to be making “good progress”; the Iranians still deny any talks are happening at all.

For Trump, a ceasefire is (or was) conditional on the Straits being reopened. US Marine Corps and airborne forces are amassing, ready to attack strategic assets including the all-important Kharg Island whence 90% of Iran’s oil exports are loaded for transport. Is it a power play bluff? Will this third round of US-Iranian negotiations in less than a year, again allegedly through intermediaries, produce a different outcome? On the past two occasions (June 2025 and February 2026), Trump was either negotiating in bad faith and intended to attack anyway, or lost his patience as Iran dragged out the proceedings and still attacked. His address to the nation this week left few any the wiser.

In the absence of clear objectives, defining “Victory” will be far from easy. But we remain firmly of the opinion that the possible combination of Trump failing to complete regime change in Iran and doing a bad deal with Russia in Ukraine simply for the political expediency of minimising the damage at the US mid-term elections, will leave the world a far less secure place. Even than it already is.

The Jupiter Merlin Portfolios are long-term investments; they are certainly not immune from market volatility, but they are expected to be less volatile over time, commensurate with the risk tolerance of each.  With liquidity uppermost in our mind, we seek to invest in funds run by experienced managers with a blend of styles but who share our core philosophy of trying to capture good performance in buoyant markets while minimising as far as possible the risk of losses in more challenging conditions.