Prof G Markets: "Is Imperialism Good for Your Portfolio?"

Date: January 12, 2026
Host: Ed Elson (for Scott Galloway, who is on vacation)
Guest: Robert Armstrong (US Commentator for the Financial Times, author of Unhedged newsletter)

Main Theme & Overview

This episode tackles the provocative question: Does American imperialism—or a more aggressive, interventionist U.S. foreign policy—ultimately benefit investors and markets, or does it create longer-term risks and instability? Ed Elson and guest Robert Armstrong unpack recent headline-making moves by President Trump, including military action in Venezuela, revived ambitions to acquire Greenland, and new rhetoric positioning the U.S. as the "apex predator" in the Western Hemisphere. The conversation explores how these geopolitical maneuvers affect capital markets, the real impact of rule of law and stability on investment, and whether short-term economic opportunism can backfire in the longer arc of history. The second half shifts to the banking sector and 2026 market outlook, including predictions, AI euphoria, and the risks that could define the next year in finance.

Key Discussion Points & Insights

1. Imperialism in Modern Markets: The Donroe Doctrine

Segment: [03:00–15:00]

• What Happened: Trump administration makes aggressive moves—military capture of Venezuela’s Maduro, renewed push to acquire Greenland, talk of force versus Cuba/Canada—framed under the "Donroe Doctrine" (a play on the Monroe Doctrine).
• Geopolitical Framing: These actions are cast as a return to U.S. hemispheric dominance, shifting from historical anti-colonialism to explicit imperialism.
• Market Reaction (or Lack Thereof): Despite dramatic headlines, broader markets haven’t reacted strongly. Selected stocks (oil refiners, rare earths) have surged:
  • Venezuela: Phillips 66 up 6%, Valero up 12%, oil services like Halliburton/Sclumberger up.
  • Greenland: Critical Metals up 25%, Energy Transition Minerals up 30%.

"The market as a whole doesn't seem to care that much. ...these very cataclysmic events in geopolitics, the market doesn’t really care."
—Ed [09:56]

• Why the Shrug?: Markets are narrowly rewarding specific sectors (e.g., oil, metals) but not pricing in broad risk or instability.
• Rule of Law Over Imperial Might: Armstrong argues that long-term markets perform best where rule of law prevails—even economic booms in China haven’t delivered for investors due to weak legal protections.

"If you think we're heading in a direction where the rule of law doesn’t apply... then you might see markets in the long run have a problem. But they’re not discounting that right now."
—Robert [07:38]

2. Short-Term Gains vs. Long-Term Costs of Imperial Overreach

Segment: [15:00–22:00]

• Short-Termism Explained: While conquering nations or seizing resources can enrich a country quickly (the "rob a bank, get richer" analogy), history (Rome, Spain, Britain) shows chronic overreach eventually backfires.
• Markets Ignore Distant Risks: Armstrong highlights that market participants rarely have a horizon longer than ~20 years—so the consequences of imperial overstretch aren’t priced in.
• Moral Hazards & System Fragility: U.S. wealth and relative peace since WWII argued as a reason to avoid "rolling the iron dice" of aggressive expansion.

"We had a pretty good thing going... Are you sure you want to start rolling the iron dice here, when we’re all living long, rich lives?"
—Robert [19:05]

3. Market Psychology, Geopolitics, & Realpolitik

Segment: [22:00–28:35]

• Investor Narratives: Markets reward resource stories (oil in Venezuela, rare earths in Greenland) but quickly realize practical limitations (cost, time to extract).
• Resource Grab vs. Hemispheric Dominance: Armstrong sees these U.S. moves as driven more by a quest for dominance and machismo than economic strategy. Ed speculates resources provide the selling point to U.S. leadership.
• Political Rhetoric & Market Impact: Trump’s unpredictability—centralized decisions on corporate dividends/buybacks, housing policy ("reverse Taco world")—rattle markets temporarily.
• Markets as an Unreliable Judge: The idea that “markets will punish bad ideas” is more myth than fact; sometimes, economics cannot check poor political decisions until disaster arrives.

"It’s too bad that it’s not true. ...That kind of general school of thought that says economics will save us is really deeply ingrained. But it’s not right."
—Robert [27:20]

4. Banking Sector: Deregulation, Profit Boom, and 2026 Outlook

Timestamps: [31:40–44:00]

• Bank Performance: Deregulation under Trump has helped banks: loosened Dodd-Frank, rolled back capital requirements, made mergers easier.
• 2025 Recap: Big bank stocks up 30% (+60% for Citigroup), strong trading and investment banking revenue.
• What’s Driving Profits: Strong U.S. economy, better regulatory conditions, roll-off of low-yield assets (replaced with higher yielding ones), robust volatility fueling trading.
• Banking in 2026: More tailwinds—potential IPO boom (SpaceX, OpenAI, Anthropic), continued high-yield assets, stable economy.
• Valuation Warnings: Bank stocks were cheap; now they are expensive. Armstrong cautions that huge repeat returns are unlikely.

“The big money is from trouble to slightly less trouble. …You don’t do that twice.” —Robert [38:34]

5. Consolidation in Banking: Is Bigger Better?

Timestamps: [44:00–50:00]

• Pro-Consolidation Argument: Armstrong says more merger activity among regional banks would increase industry competitiveness and investor returns—right now, a few giants reap most profits.
• Why It Rarely Happens: Mergers are “a nightmare” due to:
  • Attrition of top talent to rivals
  • Severe regulatory scrutiny
  • Cultural clashes (banks are still people businesses)
  • Personal incentives for regional CEOs not to sell (“the man at the country club”)
• Management vs. Shareholder Incentives: CEOs of larger banks are incentivized to overpay for acquisitions, compounding agency problems.

"If you run a bigger bank, you just get paid more money...whether it’s good or bad for the shareholders."
—Robert [48:23]

6. 2026 Predictions & Market Outlook

Timestamps: [53:03–77:10]

Predictions Rundown

• Bubble?

  • Yes, but won't pop this year: Markets are at peak valuations (top 95–97th percentile); history says correction comes, but usually not in any given year.
  • Why? “Most years we don’t [have a crash], even at these valuations.” —Robert [56:32]

• Short-term Returns:

  • "I just think returns are going to be kind of eh." —Ed [58:10]

• Biggest Risk: Inflation

  • Most leverage is now in U.S. government, not households/corporations. Should inflation reaccelerate, all market optimism goes out the window—higher rates could spark volatility.
  • "[If] inflation goes up, the 10-year yield goes to 5.5%. It's a different game." —Robert [60:44]

• AI Euphoria:

  • Already cooling. “Nvidia’s been going sideways for four months...Meta is struggling, Oracle is struggling.” —Robert [64:51]
  • If OpenAI “comes off the rails,” could be an “FTX moment” for AI and tech markets.

• U.S. vs International Markets:

  • U.S. stocks will NOT underperform Europe or Japan despite one-off 2025 outperformance by those regions; U.S. economic and earnings growth remain stronger.

• Cyclicals vs Defensives:

  • Pro-cyclical stocks (banks, materials, industrials) should outperform defensive stocks, barring an inflation shock.

• Fed Rates and New Chair:

  • New Trump-appointed Fed chair may be a “dissenting vote” but can be outvoted; real impact may be in messaging, not policy.
  • Robert predicts fed funds rate stays above 3% by year’s end, bucking widespread forecasts for steep cuts.

Notable Moment

• “We're going to have an interesting experiment in group dynamics here that we haven't had in many decades.”
  —Robert (on the FOMC’s dynamic with a new, potentially partisan Fed Chair) [76:45]

7. Personal Note & Closing

Timestamps: [77:45–79:50]

• Armstrong shares plans to compete in more triathlons at age 55—a light moment that humanizes the finance discussion.
• The conversation closes with mutual appreciation and a brief summary of Armstrong’s background.

Highlighted Quotes & Memorable Moments

• "Genius is the ability to hold contradictory thoughts in your head at the same time." —Robert [05:24]
• "You might make a joke that it’s a lot easier to extract a president from Venezuela than it is to extract oil." —Robert [09:56]
• "Can he do that?" —Ed [13:07] (on Trump’s interventions in capital allocation and housing)
• "If you overplay your hand... imperial overstretch... then suddenly you have a colony that's rebelling and then sure enough, the entire thing collapses." —Ed [16:53]
• "The thing that’s going to make you retire rich [in asset management] is retaining... assets and earning that 2%." —Robert [49:49]

Key Timestamps

• [03:00] — Overview of U.S. imperial actions, “Donroe Doctrine,” and Monroe Doctrine context
• [07:38] — Rule of law vs. imperial returns in markets
• [09:56] — Market sector reactions to Venezuela/Greenland
• [13:07] — Can the President dictate private company actions?
• [15:05] — Historical parallels to Athens/"hegemonic powers" (Thucydides)
• [22:26] — Natural resources, rare earths, and realpolitik
• [27:20] — Market narratives vs. “economics will save us” fallacy
• [31:40] — Banking sector review, deregulation effects
• [38:34] — Valuations, why 2026 may not repeat 2025’s run in bank stocks
• [44:08] — Consolidation in banking: pro-competitive or not?
• [53:03] — 2026 predictions: bubbles, inflation, AI, global performance, rates
• [64:51] — AI euphoria already cooling, OpenAI as market symbol
• [73:02] — Federal Reserve: new Chair, implications for policy
• [77:45] — Armstrong’s personal goal: triathlons at 55

Tone and Style

• Conversational, analytical, and often tongue-in-cheek. Ed brings humor and approachable skepticism; Armstrong combines philosophical depth, historical context, and dry wit.

Summary Takeaways

• Despite dramatic U.S. interventions and rhetoric, markets remain largely unmoved—caring only about specific resource plays or immediate profits.
• Strong rule of law and long-term stability are ultimately more valuable to markets than brute force or resource grabs.
• Markets and investors are myopic; long-term dangers (imperial overstretch, debt, moral hazard) are ignored in favor of short-term gains.
• Banking is booming again, but valuation risk, incentives, and coming technological change may reshape the sector soon.
• 2026 looks like a year with moderate returns, persistent bubble conditions, and high sensitivity to inflation and surprises in AI or geopolitics.

For a full, no-spin look at how global ambition can collide with economic stability—and what that means for your portfolio in 2026—this episode offers invaluable, razor-sharp perspective.