By: Yale Bock
Europe Holds, While the UK Eases, Japan Raises Rates, as Mr. Trump Turns Up the Heat Down South, and Finally, the Rial
As 2025 ends, investors increasingly allocated capital to geographies where economic conditions were moving more favorably. The primary case in point is in both the UK and Europe, where the central banks have decided to either repeatedly cut interest rates or keep them at pause for the near future. Accordingly, in 2025, banking stocks across both geographies have roared and bested their North American counterparts. One should be aware that over the last ten years, large US banking entities have dramatically higher returns than European banks. The focal point in Asia is Japan, where Japan’s Central Bank is raising interest rates to .75%, the highest level in three decades. China and India are similar in adopting central banking policies that support domestic economic growth and simultaneously keep inflation under control.
In the Western Hemisphere, President Trump continues his policy of attempting to change the political leadership of Venezuela. Mr. Trump expanded a shipping blockade to limit their flow of energy products. Here in the United States, a recent court order awarded Citgo, a large oil refiner and distributor, to a subsidiary of Elliott Investment Management. Venezuela previously owned it, but it defaulted on $21 billion of debt, so the assets were auctioned off. Naturally, Venezuela does not like the sale price, but the key point is that Venezuela is losing its largest foreign asset, one which produced plenty of cash for its ex-owners. With President Trump and Secretary of State Rubio continuing to ramp up the pressure on Venezuela, the outcome will have implications across the globe. Specifically, Cuba, China, Iran, and Russia are allies of Maduro and do not want him to relinquish power. In the case of Cuba, the country is dependent on Venezuela’s products, especially energy. With the emergence of a free market proponent in Argentina, a leadership change in Venezuela would dramatically impact economies in South America and across the globe. It is a foreign and economic dispute worth paying attention to, both today and over the course of the Trump Administration.
Let’s turn to the joy of the Middle East, specifically the sovereign nation of Iran. Long the instigator of many problems across the world, the Shia-based Mullahs are currently presiding over what can politely be called, ahem, an unmitigated disaster. The largest problems are water, energy, and the value of the currency, called the Rial. Our focus is the Rial. It currently trades at an exchange rate of nearly 1.5 million per dollar. Remind anyone of Germany Pre-World War II? As Harris Kupperman calls it, perhaps project Zimbabwe is more appropriate? Regardless, from a sustainability perspective, well, this is not going to work. The Revolutionary Guard can only do so much, and with ninety million people who are not very friendly at this point, Iran should be on your radar. Given that situation, maybe the political leadership in our country should be paying attention to our deficits and the debt on the balance sheet. Eventually, it affects the underlying currency. You might consider the price of gold and silver as the report card on that front.
Originally posted on January 1, 2026 on Y H & C blog and newsletter
PHOTO CREDIT: https://www.shutterstock.com/g/chombosan
DISCLOSURES:
Y H & C Investments may have positions in companies mentioned in this newsletter. Nothing in the newsletter should be taken as an offer to buy or sell individual securities. It is the responsibility of each investor to research the investments mentioned so it meets the return objectives, risk profile, liquidity needs, tax circumstances, and specific issues pertinent to the individual.
