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Is Japan Getting Nukes

“My country, Japan has reached a historic crossroads. It must develop nuclear weapons because it really does not have a choice.” These words written by former New York Times editor, Barry Gowan, and they would have been unthinkable almost a decade ago. 

Today, they represent a growing dilemma for the Japanese people, whether or not the nation should acquire a nuclear weapon. 

Japan is the only nation in the world to experience the devastation of a nuclear attack. As such, it has long embraced pacifism as part of its post-World War II identity. 

Article 9 of the Japanese Constitution outlaws war as a means of solving disputes involving the state and has been sacrosanct to politicians and the public alike for decades. 

The principle is so deeply ingrained that any politician who so much as hinted at touching it, risked losing the bulk of their support. So, how does a nation go from that to even entertaining the thought of having nuclear weapons? 

 An international order in flux. A little while ago, we published a video on which countries were the most likely to acquire nuclear weapons. While Japan wasn’t at the top of our list, it was pretty high up there and with good reason. In that video, we said changing international circumstances, specifically waning support from the United States, was going to drive the Japanese public toward nuclear weapons. Ruri Matsukawa, a member of Japan’s Upper House and former Deputy Defense Minister, believes that the global order has changed enough to warrant Japan obtaining nuclear weapons of its own. 

In a Reuters interview, she described a meeting with British lawmakers and diplomats at Fordham Abbey where she realized how much Europe doubted Washington’s security commitments. 

President Trump’s constant attacks on NATO, criticism of European allies, and increasing coziness with Putin has put the continent on edge. Europe was now in charge of its own security, and Europe wasn’t the only one in Trump’s crosshairs. He criticized Japan’s defense spending, wanting them to raise it to 3.5% of its GDP and trade practices, imposing a 27.5% tariff on Japanese cars coming to the Trump has also called the security arrangement between Japan and the United States unfair and reportedly mused in private about canceling the treaty altogether. 

After the Fordham Abbey conversation, Matsukawa had the same realization as European leaders, who we’ll quote her here: “You can’t really take the US presence for granted. Trump is so unpredictable, which is his strength, maybe, I think we have to always think about plan B. Plan B is maybe go independent and then go nukes.” Matsukawa isn’t the only one to question whether Japan should develop its own nukes. 

Shigeru Chiba, Japan’s current prime minister, expressed an interest in nuclear arms while speaking to the Hudson Institute before he took over the country’s top office. Additionally, Reuters talked to a dozen Japanese lawmakers, government officials, and former senior military figures who all indicated a growing willingness for Japan to have its own nuclear arsenal independent of America. 

Japan’s reliance on the US as a security guarantor goes beyond the troops stationed on its soil. Reliance on the US as nuclear umbrella is a part of Japan’s 4 Pillars Nuclear Policy. The other 3 pillars are: to provide the peaceful use of nuclear power, to work toward global nuclear disarmament, and finally, to support the 3 non-nuclear principles. 

The non-nuclear principles are the most important element of these pillars, second only to the reliance on the nuclear umbrella. They state that Japan will not possess, manufacture, or allow nuclear weapons into its territory. Developed by Prime Minister Eisaku Satō in 1967, they have been the guiding light for subsequent Japanese governments. So much so that every Japanese prime minister since Satō, including Chiba, has had to publicly reaffirm them. So, the fact that Matsukawa can have an interview openly speculating about plan B marks a seismic shift. 

However, that seismic shift didn’t begin under the Trump administration. According to Taro Kono, a lawmaker in Japan’s Lower House, it started in 2013 when the Obama administration failed to act in the face of increased Chinese aggression in the South China Sea. This, coupled with the infamous red line debacle when Obama threatened military action if Syria used chemical weapons, then failed to follow through when Assad crossed that line in 2013, painted the image of a president who would blink when push came to shove. 

Russia’s invasion of Ukraine solidified this further. Despite sending billions in military aid to Kiev, Biden made it clear that the US would not fight World War III over Ukraine. And the mention of World War III is important here because Japanese military strategists felt that Russia’s threats to use nuclear weapons, to limit intervention in the war, had sufficiently cowed Washington into not fully backing Ukraine. 

Furthermore, conflicts in Congress over the funding of Ukraine only deepen these doubts. This rocked the credibility of the US in the eyes of the countries under its protective umbrella. Russia’s invasion of Ukraine is especially pertinent given that the Financial Times leaked Russian military documents allegedly showing targets that Moscow would strike in an attack on Japan, which included roads, bridges, and nuclear power plants. 

So, for the analysts in Tokyo, the question became, would the US fight World War III over Japan? Now, we need to point out here that unlike Ukraine, Japan has a formal mutual defense treaty with the United States, the Treaty of Mutual Cooperation and Security signed in 1960. It explicitly states that the US will defend Japan if it’s attacked, making it a legally binding commitment rather than a matter of choice.

This puts Japan in the same category as NATO allies with a formal guarantee that Ukraine never had. However, those legal guarantees have done little to assuage the Japanese public’s fears. A poll published by Asahi Shimbun, one of Japan’s major dailies, found that 77% of the Japanese public doubted that the US would come to Tokyo’s defense. As faith in America was being shaken, China and North Korea were making moves that threaten the regional balance. 

According to the Stockholm International Peace Research Institute, since 2023, China’s stockpile of nukes has been increasing by 100 per year, a rate faster than any other country in the world. 

China’s sights are set firmly on Taiwan for the foreseeable future, but according to Dan Blumenthal, senior fellow at the American Enterprise Institute, the road to Taipei passes through Tokyo. Writing for The Hill, Blumenthal argues that the logic of China attacking Japan during an invasion of Taiwan is straightforward. The Chinese army would need to maintain air and naval superiority around Taiwan, and the greatest obstacle to this would be US assets stationed in Japan. 

If Beijing can maintain the element of surprise, it could knock out most US military assets in Japan while disabling vital ports. Whether or not Beijing chooses to pursue this strategy, that’s another question. 

While the US and Japan are highly vulnerable to a surprise attack by virtue of being, the surprise, they can retaliate on a massive scale, and that’s the last thing China would want in the middle of an invasion. For Japan’s military brass, having a nuclear deterrent would stop them from having to constantly look over their shoulder at China. 

On the other hand, North Korea is North Korea. If the world were a neighborhood, North Korea would be the one house with the constantly malfunctioning car alarm, impossible to ignore, extremely annoying, and, uh, also armed with nuclear weapons. North Korea recently cautioned Japan over the test firing of a rail gun, a weapon that uses electromagnetic force to fire metal slugs at speeds exceeding 5 times the speed of sound. It offers a relatively low-cost, effective means of countering threats, such as hypersonic missiles. 

According to Newsweek, North Korean state media viewed the test as a signal that Japan was considering a preemptive strike on the isolated state. Additionally, North Korea once said that the Japanese people would be cannon fodder in a nuclear war. With neighbors like these, is it any wonder that the Japanese government wants their own nuclear weapons? But what does the Japanese public think about all this? The divided public. People who work in geopolitics, analysts, diplomats, politicians, et cetera, they often make decisions based on a different set of factors from the average person on the street. They have more information, more data, and are more exposed to the threats that the country is facing. 

This isn’t to say that Joe Public is stupid. Far from it. It only means that the calculus of national security can feel very distant from everyday life. While strategists and national security experts weigh the question of nuclear weapons through a geopolitical lens, the public remains far more conflicted. To give you an idea of just how wide the divide between the 2 groups can be, a 2019 survey found that 75% of the Japanese public support joining the Treaty on the Prohibition of Nuclear Weapons, the TPNW, while only 18% opposed, with the rest being unsure. Conversely, since 2018, the government has consistently voted against a UN General Assembly resolution on the adoption of the TPNW. 

Tokyo has also made it clear that it does not intend to sign or ratify the treaty, placing its official stance in direct opposition to a large majority of citizens. Public opinion is heavily influenced by the tragedy that happened in Hiroshima and Nagasaki and, to a lesser extent, Fukushima. 

There is an ever-present fear, especially among the older generation and the survivors of the 2 bombings, that nuclear weapons could be used again. According to Kyodo News, a local Japanese news outlet, that fear is mainly driven by the Russia-Ukraine war and North Korea’s weapons program. But even with this fear, there’s a growing support for nuclear weapons. A poll published in March 2025 found that 41% of respondents were in favor of revising Japan’s non-nuclear principles. 

What’s surprising about that result is that 3 years earlier, in a similar poll conducted by the Kyocera Strategy Institute, a consultancy and think tank, only 20% supported the idea. This massive increase is powered by people like Tatsuaki Takahashi. 

Despite having a personal connection to the nuclear attacks, he lost family when the bombs were dropped, he believes that Japan should get nukes. Speaking to Reuters, he said, and we’ll quote him here, “Personally, I think allowing US nuclear weapons into Japan might be unavoidable as a form of deterrence. 

I’m still against using nuclear weapons, but just possessing them has strategic value.” End quote. For some, having American nuclear weapons in the country seems like a more palatable alternative than building their own. While both would be violations of the 3 non-nuclear principles, one feels a lot more forgivable than the other, especially if the American nuke can be removed once tensions cool down. Even then, public opinion is also split on whether the US nuclear umbrella is necessary. 

A poll conducted by the public broadcaster NHK found that 53% of respondents said, quote, “The US nuclear umbrella is necessary for now.” The now part there indicates one of 2 things, that either the American nuclear umbrella is needed until Japan can build its own, or that the umbrella is needed only until the world collectively gets its together and eliminates all of the nuclear weapons. 

We’re gonna go global and explore the worldwide ramifications of a nuclear Japan. According to the Nuclear Scholars Initiative, or NSI, Japan is a screwdriver’s turn away from having nuclear weapons. As a result of its long-running nuclear power program, Japan is in possession of quite a bit of weapons-grade plutonium, enough to make more than 1,000 nuclear warheads, according to some estimates. 

It’s also the only nation in the world that possesses a full nuclear fuel cycle without possessing any weapons. Couple this with a robust delivery mechanism for a warhead, and you understand why the NSI said a nuclear bomb was only a screwdriver’s turn away. So, what would happen if Japan turned the screw? Well, the answer depends on how fast Tokyo can actually build the bomb and how determined the world is to stop them. While Japan could theoretically produce a nuclear warhead in a matter of months, months, they’re not minutes. That timeframe creates a window of opportunity for other nations to disrupt the development of the bomb. North Korea, for instance, has sophisticated cyber capabilities that it has previously deployed to steal nuclear secrets from a host of other countries, including the UK, the US, and critically, Japan. 

A Japanese dash for the bomb would paint an even bigger target on Tokyo’s nuclear research facilities, prime targets for cyberattacks aimed at stealing technical data, introducing malware, or simply delaying the program. 

China and Russia possess even more advanced capabilities for disruption than North Korea. Beijing could leverage its economic muscle, threatening Japan’s trade relationships and supply chains for critical materials. Moscow could leverage its relationship with North Korea, providing Pyongyang with intelligence or technical assistance to aid its sabotage efforts. Beijing and Moscow could also rally international condemnation through the UN Security Council and threaten sanctions against any nation that assists Japan’s nuclear program. 

There’s also the question of whether any of these nations would risk a direct attack. A conventional strike on Tokyo’s nuclear facilities before the first weapon is completed would be risky but not unprecedented. In June of this year, Israel and the US struck Iran in the latest attacks targeting its nuclear program. Moscow and Beijing could borrow a page from this book and strike Japan. However, that would risk a retaliatory strike from Washington. But would that be enough to deter China or North Korea if they believed that Japan was weeks away from crossing the nuclear threshold? And the answer to that is we don’t know. What we do know is that these challenges, while not insurmountable, are pretty significant and could stop Japan’s nuclear ambitions before they truly start it. 

Still, let’s take our thought experiment a step further.What if Japan’s nuclear program survives all of these challenges and produces a viable bomb? How would the rest of the world react to that? For America, the reaction would vary wildly depending on who occupies the White House. A Trump administration might view Japan’s nuclear weapons as a cost-saving measure. They might view it as an opportunity to reduce American defense commitments in Asia while maintaining a nuclear-armed ally aligned with Western interests. Alternatively, a Democrat administration would be a lot less welcoming to the idea of a Japan with nuclear weapons. 

Both Obama and Biden prioritized nuclear non-proliferation, with Obama saying in 2009 while in Prague, and we’ll quote him here, “I state clearly and with conviction America’s commitment to seek the peace and security of a world without nuclear weapons. I’m not naive. This goal will not be reached quickly, perhaps not in my lifetime. It will take patience and persistence.” 

A Democratic president would likely view Japan’s nuclearization as a catastrophic blow to decades of American non-proliferation efforts. Washington would face an impossible choice between sanctioning a treaty ally or appearing to condone nuclear proliferation, potentially encouraging South Korea, Taiwan, and others to follow suit. The relationship would enter a period of serious strain, even if it didn’t rupture entirely. Speaking of South Korea, their reaction to Japan getting a nuclear weapon is, like the US, heavily dependent on who is in office. 

According to the Chicago Council on Global Affairs, a non-partisan, non-profit organization that researches global affairs, 71% of South Koreans support developing an indigenous nuclear weapons program. So a president who favors South Korea getting its own nukes could use Japan’s actions as a cover. However, the current president, Lee Jae-myung, recently outlined a plan to denuclearize the Korean Peninsula and normalize relations with North Korea. If Japan gets a nuke, President Myung might forge ahead with his denuclearization plan, or he could acquiesce to the Korean public and start his own country’s nuclear program. For North Korea, if their attempts at stopping Japan from obtaining the nuclear weapon fail, Kim might go back to the usual bluster and rhetoric that we’ve come to expect from him. This would mean more weapons tests and terse statements to the press that stop short of direct confrontation with Tokyo. 

There’s also the possibility that Pyongyang decides a nuclear-armed Japan is an existential threat that must be neutralized. The risk isn’t necessarily a full-on nuclear Armageddon. North Korea might calculate that a limited conventional strike threatening nuclear escalation only if the US intervenes directly, and that could stop Japan’s nuclear program without triggering mutually assured destruction. After all, North Korea knows how unpredictable it seems, and if North Korea is willing to attack Japan conventionally, then perhaps foreign powers will convince themselves that nuclear Armageddon is a possibility if the situations are brought under control. It’s a dangerous game of brinkmanship, but the Kim regime has built its entire survival strategy on such calculations. And unlike the Cold War superpowers, North Korea has far less to lose. And speaking of the Cold War, Russia. Moscow’s traditionally had a complicated relationship with Tokyo, largely defined by the unresolved territorial dispute over the Kuril Islands. 

If Tokyo were to obtain nuclear weapons, Russia’s approach to its relationship with Japan would change immediately. On one hand, the Kremlin would see a nuclear-armed Japan as a direct challenge to its regional influence, which might cause it to deploy nuclear weapons close to Japan, perhaps even on the Kuril Islands. 

On the other hand, Russia is still fighting Ukraine, and antagonizing a newly-minted nuclear power beyond any attempt to stop it from actually acquiring nuclear weapons might not be in its best interests. What is almost certain is that Russia will try to use this incident to paint the West as hypocritical. would probably accuse the West of secretly aiding Japan’s adoption of nuclear weapons while pushing for nuclear non-proliferation. And speaking of hypocrisy, a move toward a nuclear Japan is not an issue that Iran would take lightly. Tehran has been punished relentlessly by the Western world for its attempts to create its own nuclear weapons, and for Japan to avoid the same fate, or even to be cheered along by those same nations, is the kind of affront that Iran would likely try and exploit. 

Beyond any hurt feelings in Tehran, a nuclear-armed Japan would give Iran a new angle to pursue on the diplomatic stage. After all, a nuclear Japan means that the world’s going to be a 2tiered system, where you’re either chosen to join the exclusive club at the top or you’ve got to shut up and just accept your lot. And if Japan were to go nuclear with the support of its allies in the US and Europe, then nations like Russia and China will be looking for a way to level the playing field. In a world where it’s all right for the global West to openly support a nuclearizing Japan, it’s also okay for other world powers to openly support a nuclearizing Iran. 

And finally, there’s China. A longstanding geopolitical foe of Japan, China wouldn’t want Japan to get nuclear weapons, and even that feels like an understatement. Presently, any expansion of Japan’s conventional arsenal is met with suspicion. Chinese military observer Zhang Xuefeng accused Japan of using its growing arsenal of UAVs to disguise offensive ambitions as a defensive necessity. If this is how Beijing responded to drones, you can imagine how they would respond to nukes. 

At a minimum, Beijing would probably accelerate its already blistering nuclear buildup, adding far more than the 100 new warheads per year it has been stockpiling since 2023. And, as we mentioned, China would also rely on diplomatic and economic tools to try and punish Japan. 

The most important question for China, beyond punishing Tokyo, would be how this impacts its plans for Taiwan. Japan’s newly elected prime minister, Sanae Takaichi, recently said that the use of military force by China on Taiwan, such as a naval blockade, would likely constitute a, and we’ll quote her here, “survival-threatening situation” that would force Japan to respond. 

Japan with nuclear weapons, willing to defend Taiwan, would fundamentally alter Beijing’s calculus. Are the fears of Japan getting a nuke overblown? Okay, now that we’ve considered what might happen if Japan got nuclear bombs, we have to consider the inverse. What if fears of Japan’s getting a nuke are overblown? 

Korean analyst Gabriela Bernal ponders this very question in a piece for the Singapore-based news organization, Channel NewsAsia. She points out that although several politicians have been pushing for Japan to have nuclear weapons, their views are in the minority, especially among the general public. The Japanese government has consistently advocated for a nuclear-free world in their annual address to the United Nations. 

In this year’s address, the government declared that, and we’ll quote them here, “Understanding the reality of the atomic bombings is the starting point of all efforts toward nuclear disarmament.” In the same statement, Japan called for strengthening the Nuclear Non-Proliferation Treaty and committed to working with the international community toward the achievement of a world without nuclear weapons. Furthermore, Japan is also a co-author of a draft UN resolution titled Steps to Building a Common Roadmap Towards a World Without Nuclear Weapons. 

These do not seem like the actions of a government working on a secret nuclear plot. And even if they were, their hands would be tied by Article 9 of the constitution and in the 1955 Japanese Atomic Energy Basic Act, which prohibits any military use of nuclear technology. Japan is also a signatory to the aforementioned Nuclear Non-Proliferation Treaty and, as such, is bound by Article 2, which prohibits receiving, manufacturing, or seeking assistance in developing nuclear weapons. 

While the treaty does not penalize members for breaking it and includes specific provisions on how members can withdraw, doing so would isolate Japan diplomatically and potentially trigger economic sanctions. 

Finally, Japan wouldn’t want to be the cause of inflamed regional tensions and a race to acquire even more devastating The country’s foreign policy since World War II has been defined by caution and restraint, and it seems unlikely that that would change anytime soon. This isn’t to say that it’s completely out of the question. This is geopolitics at the end of the day. Nothing is ever really out of the question. 

So unless something extremely drastic happens, Japan will most likely not join the nuclear weapons club. Quoting Gabriela here, “The costs would far exceed any potential benefits and the risks could precipitate the very outcome Japan seeks to avoid: armed conflict.” Japan’s path forward lies not in nuclear weapons, but in strengthening existing security partnerships while continuing to lead the global disarmament movement. Thank you for watching.

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CBS Radio Mystery Theater | Ep5 | “No Hiding Place”

.Now, if you don’t get out of my office and leave these premises immediately, I’ll have you put out. You must be putting on an act, Mr. Charles Powell. Maybe this will jolt your memory. 3, 5, 4, 1, oh, 6, 3. What? 

Yeah. I thought that would do it, Charlie.

 I thought that might help you remember. 

Our mystery drama, No Hiding Place, was written especially for the Mystery Theater by Sidney Sloan and stars Larry Haynes.

 It is sponsored in part by the Kellogg Company, makers of Kellogg Special K Cereal. I’ll be back shortly with Act One. Special K breakfast. That’s Kellogg’s Special K. Good night. Well, it’s all right to tell one lie, isn’t it? You can’t. 

Then how about lying just a little bit? Not a little bit. You mean you can never lie? Never. Well, why not? Because when you tell a lie Yeah? It gets stuck inside your heart. 

You mean that just one lie will make your heart dark? Makes you sad, too. Oh. Then what should you do if you tell a lie? Well, you should say, I’m sorry. And then what? 

Then the light goes inside your heart. Oh, the light goes on? 

Yes. Oh, a light doesn’t really go on in your heart, does it? 

Yes, it does. Well, how do you know? 

Because the light in your heart will shine in your eyes. Oh. And then you’ll be happy. Hmm. I wonder why people tell lies. I wonder why, too. From the Franciscans, with love. 

Everything looked right to Charles Powell that crisp September morning when he walked into his executive office at the J.P. McCready Company. And why shouldn’t it? Charlie Powell was a big shot there. 

At 37, executive vice president of one manufacturers of heavy construction equipment in the country. And he had done it all in less than 12 years. 

It was a real-life Horatio Alger story, even to his being engaged to J.P. McCready’s daughter, Alison. How could anything go wrong? 

But it did. The moment he walked into his private office. Yes, Elsie. There’s someone Appointment? Mr. Powell, maybe I’d better come in and explain. Yes, all right, come in. Sorry if I sound strange, but really, Mr. Powell, that man is kind of frightening. Frightening? 

Well, he just sits there and grins at me. I told him he didn’t see people without an appointment. He said, oh, he’ll see me. Just tell him it’s an old friend, Clint. You know anybody by that name? No, it doesn’t ring a bell. send him in. 

I’ll get rid of him. Okay. Don’t say I didn’t warn you. Mr. Powell will see you. Nice of you to see me, Mr. Powell. Well, I try to see everybody, Mr Just Clint. I don’t think you ever knew me by anything but You must remember, Mr. Powell. Well, I’m sorry, but I don’t Come on, give it a try. Give it a good try. Now look here, I’m busy and I have neither the time nor the patience. You must be putting on an act, Mr. Charles Powell. Maybe this will jolt your memory. 3, 5, 4, 1, oh, 6, 3. Yeah. I thought do it, Charlie. I thought that might help you remember. Charles? Oh, I’m McCready. I guess not. Here I take you to the best French restaurant in town. 

You pick at your food, gaze into space, send your dinner away hardly touched. Did I send all that good food back without eating it? You did. I particularly wanted to see you alone, Charles, because I have a little news for you. 

News? kind of news, Mr. McCready? And that’s another thing. You’re so damned formal with Mr. McReady, do you realize that in exactly 5 weeks you’re going to be one of the family? Yes, of course I realize. 

How could I overlook it when Allison keeps reminding me regularly? Very well, Do you think it proper to call your father-in-law-to-be Mr. McReady? If you don’t start calling me John Okay, John Little P. I’m, uh, I’m going to leak a little information to you. As you know, I’ve been thinking of stepping down from the presidency of the company. 

Yes, well, it has been rumored, but I wish you’d reconsider it. Now, sincerely, the place wouldn’t be the same without you. Oh, I’ll still be there, Charlie. I’m not giving up my stock. The name of the company will still be J.P. McReady Company. The only difference will be that You will be sitting at my desk. Sitting at your desk? 

Well, I thought Hedges was slated to take over when you stepped down. No. Tom was seriously considered. But he’s a bit too old for the job. No, the company needs young blood. Well, I’m really bowled over. I’ve watched you grow. Come up on merit. Ability. You’re going to go far, my boy. Of course, the board will have to vote on your appointment, but that, as the saying goes, is in the bag. Well, there’s something you’ve omitted, John. 

You haven’t asked me if I wanted the job. Is it necessary to ask? I remember another lunch with you several years ago. We got talking about ambitions, and you said that you would never be satisfied with second best. It had to be the job, or you’d move on. 

Yes. that was before this morning. Uh, nothing. Just mumbling. I’d like to know how you feel about it, Charles. Well, even to be considered for the position is an honor, Mr. John. And your answer? Let me think it over. I think it over. I don’t think I’ll accept. What? But, darling, it’s right for you. Ridiculous, darling. No, I’m being practical and sensible. 

My being president of the McCready company would I knew you’d come. Suppose it gets too much for me and I say, go ahead, spill what you know. No, you wouldn’t do that. Even a couple extra grand. I don’t like the way you put that, Charlie. 

Oh, yes, Mr. Mc Yes, John. 1015? No. uh I’ve had some things on my mind lately. I’m sorry it was so noticeable. It occurred to me that a young man gets a bit absent-minded as the day of his wedding approaches. frightened. No, no, no, it isn’t that, J.P. Oh, uh, excuse me, John. Someone’s at my door. Hold on. Just a moment. Forgive me for coming here at I’ve got your father on the phone. Come in, darling. Hello, John. It was just the porter with a package. What were you saying? backing you all the way. Well, I appreciate your feelings, J.P., but there really is no cause for concern.

 I’ll snap out of this in a day or so. It’s reassuring to hear you say that. disturbing you. No, no. I wasn’t disturbed. Thanks for calling. Good night, J.P. Even Dad notices that something is wrong. Yeah. I haven’t seen you in 3 days. Are you trying to tell me something? All I hear All I want to tell you is that I Love you very much. From a distance? Hmm? I called you at your office twice this afternoon. Allison Allison, I can’t keep this from you. 

I thought I could, but every day, every hour, it grows bigger. Until now, it feels as though it’s going to engulf me. And you are life. Everything that has meaning for me. Darling. No, no, no. Hear me out. And then if you want to go out that door quietly,

 I won’t say anything more and you can forget that you’ve ever known me. I loved you. Are you trying to say you don’t want to marry me? That you stopped loving me? Darling, it’s because I love you that I’m going to tell you. 

I considered keeping the whole matter from you, writing out the trouble and probably overcoming it. Darling, how little you know me. No matter what the trouble is, I want to be with you. If you want me. Allison, I’m a fraud. 

What? I’m not Charles Powell. It’s a name I assumed to hide my real identity. Want me to go on? Yes, darling. Go on. At the age of 22, I was charged and convicted of murder and sent to San Quentin for life. I was innocent, evidence, circumstantial evidence, court-appointed attorney who didn’t know what to do or didn’t care. 

A weak effort to appeal which was refused and There I was, at 22, in prison for life. Chance of a parole only after serving 20 years. I’d be old, all my young life confined in prison. So, when I had a chance to get out You escaped. And ran for 2 years.

 Do you know what it means to be hunted? You can’t get a job, you have no place to live, you can’t have a sleep for fear someone will see you and turn you in. Oh, darling. I was ready to give myself up. When I suddenly discovered that it wasn’t necessary to run any longer, I picked up a 2weekold newspaper and read a report of my death. What? Yes, a man. 

A man had been burned to death in a flophouse fire. The only thing he had on him was something that I had kept, my only possession. A locket belonging to my mother. It had a picture of her taken when she married my father. And it had been stolen from me as I lay asleep in a freight car. I guess the thief thought it was gold. It was just cheap gold plate. 

And the man was identified as you? My mother and father’s names were inscribed on the back. The man was so badly burned that the locket was the only thing that could possibly identify him. And after 2 years of hunting, the authorities were glad to close the file. On Robert Hagen. Robert Hagen Sounds so strange. The name doesn’t fit you. 

Oh, it sounds strange to me, too, now. Darling, I’m innocent. I never did it. It was all a mistake. I don’t doubt that for an instant, dearest. I only wish you’d never told me. I had to tell you. I You see, someone knows who I am. He’s blackmailing me. When you’re being blackmailed, you don’t have many alternatives. Charles Powell’s whole life is future. I’ll be back shortly with Act 2.

 I’m High Brown, producer of Radio Mystery Theater. And as you may imagine, I’m excited about this new adventure in modern radio.

All for good everywhere, unless locally prohibited. It’s always a pleasure to add beautiful new furniture to your home. 

And it’s even more Yes, Elsie? Hamill? Well, we’re not playing tennis until tomorrow. I’ve got something else to talk about. Business? 

Yours or mine? Okay, come in, George.

 Sorry to barge in on you. I know you’re busy. Well, I’m never too busy to see George Hamill, rising young district attorney and next governor of the state. Your humor creaks, Charlie. Seriously, I’ve got something that sort of disturbs me. 

Oh? What does? Last night in a bar over on the west side, a man was bashed over the head with a bottle. He’s in serious condition. 

Well, what has that got to do with me? Yes? He’s asking for you. Says you’ll go as bail. Now, what I want to know is, how does a guy like you get mixed up with a Joe like that? George, what did you think? That he and I were buddies or something? didn’t know what to think. Well, I do know the man. He applied for a job with the company a week or so ago. 

The foreman who interviewed him discovered he was an ex-con and he refused to hire him. It was brought to my attention when one of the societies that helps ex-cons called me. So you got him a job in the plant? No, no, no, no, I couldn’t. I mean, I wouldn’t go over the head of the foreman, but I did see him and I, you know, handed him a couple of dollars. 

A couple of dollars. You know how much money he had on him when we brought him in? Two hundred and 76 dollars. Oh, well, maybe he got lucky at the races with the money I gave How much was it? Oh, gee, I don’t remember. 15, 20. I just took it out of my pocket and handed it to him. It was a, you know, a way of easing my conscience. 

I felt bad about the way our foreman had treated him. take my word for it. This Clint Livet is a bad customer. Stay away from him. Uh-huh. Uh, what, uh, what will become of him? Well, he’ll go back to the pen where he belongs. Well, what’s the bail set at? Five thousand And you’re not seriously considering putting it up, are you? No, I was just asking. 

Because if you are, that’s the last you’ll see of your money. And for that matter, Mr. Livitz, he’ll jump bail. Please, George, I’m a big boy now, and I think I can make my own decisions. Well, who would have thought it? Charles Powell Bleeding Hearts. Now, look, we’ve been friends for over 5 years. 

When you were running for D.A., I backed you with substantial contributions. I like you. You’re my friend. Now, let’s not kick that all out because of some stupid disagreement. No. Let’s not kick it out. I’m sorry, Charlie. But I just can’t understand what your connection with that ex-con is. I hope you’ll understand.

 I accept Clinton Livid’s case with strong reservations. Yes, I understand, Mr. Cargill. As an attorney, I Well, how shall I put it? You, uh You don’t like your client. Exactly. However, I shall do my best to get him off. Or at least get him a light sentence. I’m extremely pessimistic about Mr. Livitz even showing up for trial. Yes. George Hamill also said he expected that Livitz would jump his bail. And you would forfeit five thousand dollars. 

Yes, I know. And that doesn’t disturb you? No, no, I I don’t believe he’ll run. Do you want to speak with him? He’s been released. He’s waiting in the other office. Uh, not particularly. He says he wants to see you. Oh. Well, in that case, yes, I’ll see him. Send Mr. Leverts in. I’ll leave you alone. If you need me, I’ll be in the other office. 

Now come in, Mr. Leverts. Mr. Powell will speak to you. Thanks. I’ll be back when you call. Just flip the switch on the intercom. Yes, I will. You sure know how to complicate things, Clint. Story of my life. Do you realize you could go up for one to 5 years for what you’ve done? No. couldn’t happen. What do you mean it couldn’t happen? 

Because you wouldn’t let it happen, Charlie. Look, even with the best lawyer defending you, he can’t guarantee he’ll win the case. You won’t let me go to prison, Charlie. I’m doing my best for you, but No buts. I’m not going back to the pen. Okay. Okay, you’re not going back. Now, suppose Just suppose, during the trial, if things look bad Yeah? We, uh We get you out of town and let you run for it. Forfeit your bail. Oh, you’d like that, wouldn’t you? I’d be out of your hair and all it would cost you would be the 5 G’s for the bail. No, no, no, no, no. I’d give you a substantial sum. Oh, Powell. No sale. too old to run. Well, suppose I, uh I got you out of the country good hunk of bread stashed away for me. Swiss bank account. I don’t know. 

Why don’t we, uh, play it by ear? Come in. You, uh, wanted to see me, J.P.? Uh, yes. Can you spare a minute? Yeah, sure. I’ve heard it on the grapevine that you were How shall I put it? That you were aiding some ex-convict in trouble with the police. Is that true? Yes, it’s true, John. And I think I know what kind of grapes grow on that grapevine. All right. Now, George Hammer Oh, that damn busybody. Why can’t he stick to his job? Now, George is a friend. He tells me that the man you’re protecting is a rather reprehensible character. Will you let me explain? It’s just a matter of policy, my helping this man. Policy? Well, yes, you did ask me a few days ago to consider taking over the job of running this company. You’re going to accept? Well, I was going to tell you today. Wonderful. Wonderful news. Alison will be delighted. I know she’s been worried about your seeming reluctance. Oh, no, no. Not reluctant any longer. In fact, I’ve got all sorts of ideas about what I want to do. This business of giving a hand to ex-convicts is just one of Do you realize what this would mean in publicity for the company? To take an interest in the rehabilitation of men who would otherwise be lost, a burden to the taxpayer? I’m going to hire a PR man. We’re going to be the big corporation with a heart, J.P. Lies. Lies, lies, and more lies. How can I keep all these Tony stories straight, Allison? 

It’s like a long, dark tunnel with no ending. It will end, and it will all turn out all right. Don’t lose your courage. No, I love you, and me too. We’ll worry this out together. You know, you know what I’ve considered? What? Going to the authorities and saying, look, I’m Robert Hagen, the man you think died 13 years ago. No, darling, they’d throw you back into prison while I No, hire the best lawyer. No, no, don’t. Please don’t take such a chance. What would I do without you? Darling. Darling, I don’t know how much longer I can stand this pressure. I’ve got to do something. Something to free myself. Why not give him a lot of money and ask him to go away? Promise to stay away forever. In Hargrave’s office, I suggested that he jump bail and get out of the country. What did he say? Well, when I mentioned a big sum, I didn’t exactly say how much. You know, Swiss bank account. 

He was interested. Did he say he would accept? Well, we were interrupted, and he didn’t say definitely. Offer him anything. Just get him to go. Well, how would I get a large sum of money together? I have some small investments, a fair bank account, but What he might want would be beyond me. You forget you’re marrying a very rich girl. Oh, no, no. No, I wouldn’t think of that. Don’t give me that male ego business. I’ve got money. 

That was nice enough to give me a big hunk when I was 21. Now, look, look, Allison. With all my earthly goods, I thee endow. We’re not married yet. You’re not going to back out now, not after I’ve endowed you with all my earthly Or is it worldly goods? You know, you are the nuttiest woman I’ve ever known. You see, I’ve got to laughing. Darling, all our troubles are going to evaporate. Vanish. It won’t work, Alison. It’ll never work. But you said Leverts will never stick to any bargain. He’ll want more and he’ll want more. He’ll never be satisfied. But we got him out of the country. 

What’s to keep him from coming back when he’s broke or even threatening us from abroad? I gave him a thousand dollars in cash only a few days ago. When he was picked up in the bar, he had only about two hundred and 70some dollars left. In a matter of 2 days, he’d squandered over 700. But if he were made to understand that the sum agreed on was all he was going to get Can’t I make you understand? 

We’re not dealing with a rational, honest man. He’ll agree to anything, and then he’ll When his money runs out or he decides he wants more, he’ll be right back. What can you do? There are only 2 things one can do about a blackmailer. Keep on paying and paying forever. And the other? And the other? Kill him. Just 2 ways to deal with a blackmailer. 

Charles now must face his conscience. The thought that has been in the hidden recesses of his mind has been spoken aloud. We will be back shortly with Act 3.

 Get the very her more than her set was worth. Gosh, Who are you? I’m the man from your Better Business Bureau. Now, before you take your set in for repairs, shop around and check into a firm’s reputation. You know, that’s even more important than the price. Friends and neighbors can help, or you can ask for a few names of previous customers to find out if they were satisfied. And since the amount you pay will vary from one place to another, it’s up to you to find out in advance what a service will cost if you have it fixed at home. Just another consumer tip from your better business bureau. 

Charles Powell’s life has reached a climax He must make a decision to rid himself forever of his blackmailer. And perhaps that very decision will destroy his life The alternative is to keep paying and paying, never feeling safe. Alison, I was You were expecting him, weren’t you? 

Yes, yes. I gathered as much when I called you at the office this afternoon. Aren’t you going to ask me in? You were so evasive. Well, he wanted to see me this evening. He wants more money. And you’re going to give it to him? Well, I haven’t many choices, have I? You mentioned one. No. No, Allison, I’m sorry I let that slip out. I didn’t mean it. I couldn’t go through with that if I wanted I could. Honey, you don’t know what you’re saying. I know very well what I’m saying. 

How long do you think you can keep this business hidden? Well, I don’t know. I don’t know. Maybe forever. Look, look, he’s not a young man. All those years in prison, the kind of life he’s led, how many years do you think he has left? He could die tomorrow. He could do something tomorrow that would expose the whole game, and then where would we be? No, Charles, I love you. I want us to marry and live a good, peaceful life. How can we with all that hanging over darling. Darling, you don’t really know what you’re suggesting. Look, maybe if we could get him to leave the country You said there were only 2 ways to deal with a blackmailer. To keep paying No, no, to murder him is unthinkable. George Hamill asked me to stop by at his office this afternoon. Why? He’s not stupid. story you gave my father about helping ex-convicts as a public relations stunt didn’t wash with him. He wanted to know what I know. Well, he was just fishing. 

The best way would be to make it look like an accident. Allison, we Hear me out. A car accident. How? If I cracked up with Clint in the car, I might be the one who gets it. And what guarantee do we have that he would die?

 No, you can’t be in the same car. If he were in another car and you were following him. And if you raced ahead of him and cut him off and forced him to crash off the road. Oh, if, if, if. It’s too iffy. It’s so impossible. It’s so dreamlike. It was a dream. Last night I dreamt you were in a car with me. We saw Clint up ahead of us. I said, there’s Clint ahead of us. Cut him off and make him crash. Faster, faster. We’ve nearly caught him. 

Now we’re alongside him. Push him over. Cut in front of him. woke up. I was calling out. I was afraid someone had hurt me. Oh, my darling. was all so real. Let’s flip now. Honey, you go out the back door. I’ll phone you later. I’m going to stay and meet him. No. I’m staying. I’ve got something to say to him. He won’t like your being here. Well, it sure took long enough What’s the idea, Powell? Uh, this is my fiancée, Alison McCready. What’s she doing here? Will you come in and stop being childish? I ain’t saying a thing. You got nothing on me. And remember, Mr. Powell, you got a lot more to lose than I have. I’m not going to lose anything, Mr. Levitz. You’re going to gain by my being here. Yeah? Mr. Powell has told me his story, and I agree that it must not get out. Go on. I have a lot more money than Let me put it this way. Charles and I are going to be married. We want you to leave the country. I bet you do. Look, Clint, you’ll do better by accepting our proposition. 

We intend to hand you fifty thousand dollars. And an airplane ticket. One way. And never come back. And never come back. I always wanted to travel, but What? 50 G’s. Just chicken free. Well, that’s all there is. Not enough. I’m thinking around a quarter of a million. Out of the question. I’m not going to bargain with you. I can raise 100000. No, Allison. It’s worth it, Charles, if we can depend on Clint to wipe the whole matter out of his memory and just go away. 

Oh, you can depend on me. I’ll keep my Then it’s a deal? A deal. Good. It’ll take about ten days to raise the money. I ain’t in a hurry. You are. And, uh, speaking of money, that was the reason I, uh, came tonight, Charlie. Yeah, here. That’s 500. What? said a G like the last time. That’s all I could raise in a hurry. When that runs out, I’ll have more. You went through that first thousand awfully fast. Well, I got rolled in that bow where I had the trouble. Oh, that reminds me. Your trial comes up in less than 3 weeks. Yeah. Lawyer called me at my hotel. See if I was still around, I guess. 

Our plan is for you to jump your bail. I’ll forfeit the five thousand I put up for it. And get you out of the country. With a keister full of green. Now, wait. I ain’t got a passport. Now, that can be arranged, Clint. Just leave that to me. Okay, friends. You got yourself a deal. You’re going to put this meal on your expense account, I hope. Too rich for your blood, George? Too rich for my pocketbook. 

That’s J.P.’ ‘s favorite French restaurant. Yeah. Nice to have wealthy, high-paid executives for friends. I’m a simple man. I like simple things. And I like simple answers. Really? How long are you going to cling to that cockamamie story about your helping ex-cons rehabilitate themselves? 

Well, it’s the McCoy, George. That guy got something on you, Charles. Pardon, monsieur, the telephone for you both. Yes, thank you. Where is it? It is here, monsieur. I will plug it in for you. Thank you. Just like the movie? Yeah. Hello? Oh, yes, Allison. George Hamels with you else. He told me you were Listen to what I’m going to say, but don’t let on to George. Uh, yes, yes, yes, dear. Uh, Allison says hello and to remind you that in two and a half weeks, she wants to see you at the church promptly at 11. I’ll try to remember. Okay. He’s all set, darling. Now, what’s so important? 

I’ll have the house all Uh, why is the color scheme so important? The housekeeper and her husband are going into town to see their 15yearold son in the high school play. Well, I don’t see that that’s such a problem. Choose whatever color will make the bridesmaids happy. Rent a car and let Clint take it to drive out and be here promptly at 9. You’ll bring it back after it’s all over. You couldn’t get here because your car was out of order. Oh, Yes, I follow, dear. I follow. I’m not sure I agree. it. 

Yes, I. I know you have to ask him to come, dear, but. Then what do we do with the unwelcome guest? bags. But, uh Suppose the gardener wants to supply some flowers for He’s been gone over a year, fired. As soon as it’s all over, we’ll take the rental car and dump it over the edge of the road near town. guardrail? Mm-hmm, yes, yes, I know. I know. Yes, uh, color scheme suits me fine, dear. 

You sure have it all planned. No baubles, uh, no slip-ups. planned? Yes, I’ll be in my office till late tonight, 9 at least, if you want to reach me. for George’s ears, wasn’t it? Yes, that’s correct, Allison. Now, look, I have a report to get out. If you’ve completed your instructions, I’ll get back to my lunch with George. Goodbye, dear. Wow. That’s only the beginning, Charlie. 

Wait till she gets your sign on the dotted line. What is it, Elsie? There’s been a terrible accident on the late shift. The man’s caught in a machine. The big press, they said. Oh, good Lord. Has the hospital been called? I don’t know. Well, call them on your phone. I’ve got to use this one. Yes, sir. I’ll call. And then call down to the plant and tell them I’m coming down. 

If it’s what I think it is, the machine will have to be partially dismantled. Yes, Allison, listen, there’s a change of plans. Charles, where are you? I’m still at the office. Something’s It’s 830. He’ll be here at 9. Yes, I know. He has the rental car. I got it for him. When will you be here? Well, there’s been a bad accident on the night shift. A man’s caught in the big metal press.

 I’ve got to help get him out. What about us? Well, when he comes, stall him. Just tell him what happened, why I’m delayed. I haven’t got the money, Charles. Tell him I’m bringing the money, the airplane ticket, and the passport. Just stall him. I’ll do hurry. He scares me. Allison! Open up! Clint! Clint, don’t leave! Will you wait? I’m here! Clint! Clint! him. I gotta catch him.

 Let him burn. No, there’s nothing wrong with the car. I just want to report it stolen. secretary called at ten this morning. My name is Charles Powell. just a moment. Oh, George. George, it’s kind of late for a visit. Come in. Thanks. I was just trying to phone Allison. Boy, what a night this has been. There was an accident at the plant. Peterson, hope they don’t have to agitate. I heard. Yes, and then when I got outside, I had a date with Allison. The car that I had rented this morning was missing.

 It was stolen. What happened to that great, big, powerful foreign job of yours? Oh, it wouldn’t start this morning. Had Elsie call the service people, but they haven’t picked it up yet. I just called them. They They have a night answering service. You’ve had a busy evening. 

Yeah, very. Well, I think I can clear up one of your puzzles, Charlie. Your rental car was found with a thief in it. You caught him? Burned to a cinder. Oh. Must have been going at a terrific speed. Tire marks on the road as he went off. Cracked up and burned. Yeah, yeah. Some kid? No. This may surprise you. It’s your protege, Clint Livitz. We found enough of him to identify him. In a slightly burnt, but still usable bankroll of sizable proportions. Well, that closes his case, doesn’t it? And opens up several others. Incidentally Where were you all evening? Home. 

After I got back from the plant. You didn’t go out. Well, I told you. My rental car got stolen. I came home by cab to change my clothes. The big car is out of commission. I won’t play games with you, Charlie. I checked it in the driveway just before I came up. The engine is still quite warm. You want to explain that? No, I don’t want to explain. 

Charlie, I’m arresting you for murder. I must warn you that what George, what are you talking about? Are you accusing me of Clint Livid’s death? No, no, that was obviously an accident. I’m holding you for the murder of Allison McCready. 

The girl you were going to marry. And in conclusion, ladies and gentlemen of the jury, my prosecution of Charles Powell, or Robert Hagen, has been a painful task. I was his best friend. It was difficult to believe that he would kill the woman he loved, but the evidence is conclusive. 

Charles killed his lovely fiancée because she discovered his real identity, an escaped convict, a killer sentenced to life for another murder. The testimony of the housekeeper, Mrs. Francis, cannot be doubted. She did not leave the house as he thought. 

She saw him run from the house, jump into his car, and race away. And then she discovered the body of Allison McCready through the head. Your Honor, may I May I make a statement before you pronounce sentence? I did not kill Allison. 

I loved say anything more in my defense is useless and unnecessary. Allison is dead. All I ask is that I be given the chance to follow her. Swiftly. And efficiently. And so a man is twice accused of murder and twice sentenced for the crime. 

A weary man who asks only to be allowed to follow the woman he loved. I’ll be back shortly. Take the time What difference did it make that he knew that Clint had murdered Allison? 

They didn’t believe him. Our cast included Larry Haynes, Ann Meacham, Jackson Beck, Sidney Walker, and Tom Keener. The entire production was under the direction of Hyman Brown. not tonight, anyway. His clothes. clothes. 

He’d empty his suitcases and put his clothes in the closet. Here’s his suitcases, too. Just ladies’ clothes. Yours, ma’am? Yes. Hey, look, look, this dream you had It was no dream. Okay, okay, so maybe you imagined I didn’t imagine anything. Do you imagine a husband? Do you imagine a month-long honeymoon? 

You imagine a man in a chair with a knife in his chest. 

Radio Mystery Theater was sponsored in part by Anheuser-Busch Incorporated, brewers of Budweiser. This is E.G. Marshall inviting you to return to our mystery theater for another adventure in the macabre. ¶¶

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Sunday Jan 4 transcript

2026 Outlook: AI lift and economic drift

It’s as much about the quality of the analysis in private equity as it is about the quality of the company. You really have to have people who understand a balance sheet, who understand a property, who understand a business, and who are not going to overpay for it. So I think it’s who you invest with in private markets is so much more important than in public markets. Absolutely. Very true. And on the public side, Jack, where do you see investors as most off sides based on the discussion we’ve been having? I mean, David, I think it was you that mentioned that, you know, bonds had sort of lost their luster when equities are doing double digit returns every year. I mean, you could extend that and say basically everything’s lost its luster compared to U.S. large cap growth equities. 

Welcome back to Insights Now. I’m Gabriella Santos, Chief Market Strategist for the Americas here at JPMorgan Asset Management. The leaves are falling outside, so it must be year ahead outlook season for us strategists. After weathering the 2025 policy storm, 20 26should be another year of U.S. economic resilience, continuing to support risk assets like stocks and corporate credit. 

But a lot is happening beneath the surface with modest cyclical economic momentum versus powerful structural trends powering markets. The risks around the base case outlook are wide next year. And for investors, the biggest risk remains the elevated starting point for risk assets, especially in the U.S., and how offsides portfolios have been to the broadening of asset class returns underway. As 2025 show, diversification can come roaring back with a vengeance to dive deeper into our 20 26outlook entitled AI lift and economic drift. 

I’m excited to be joined by David Kelly, chief global strategist and Jack Manley, global market strategist here at JPMorgan Asset Management. If you’re listening to the audio version of this podcast, you can also watch along on YouTube by tuning in to our J.P. Morgan Asset Management channel, which is linked in the show notes. All right. 

Now let’s get started. 

David and Jack, welcome back to Insights Now. 

Got to be here. Thank you. 

David, why don’t we kick things off with you? What’s your base case for the U.S. economy next year? 

OK, so we’re entering 2026 after the government shutdown just ended and frankly, after what we think was a pretty weak 4th quarter. But going into 20 26, we expect that things are going to heat up and then cool down as the year goes on. first of all, in terms of economic growth, we think economic growth close to 0 percent in the 4th quarter of 20 25, then lifting up to something over 3 percent in the first half of next year, mainly because of huge income tax refunds associated with the OPPVA, which was passed last July. But these refunds will then get spent, and when they do, the economy is going to slow down again. 

Now, there are a lot of things dragging on economic growth. We’ve got a lot of concerns among lower-income individuals and middle-income individuals. We don’t have much employment growth or population growth. And we’ve got a lot of tensions with the rest of the world because of tariff policy. But still we’ve got this, you know, we talk about AI lift and there is a boom going on in AI and we think that all, you know, the situation is probably somewhere down the middle where the economy keeps on growing.

 It just grows fast at the start and slows down later on. That’s in terms of economic growth, in terms of unemployment. We think job growth will be very slow. I wouldn’t be surprised if job growth over the next year averaged about 50000, I think, per month. It could be higher than that in the first half of the year and maybe lower than that in the second half of the year. But even if that happens, because we’re seeing a shrinking working age population, population age age into 64 will be shrinking, we think, in 20 26. 

And because of this, we think the unemployment rate may only get up to maybe four and a half percent by the end of twenty twenty five and then just slowly come down over the course of 20 26.

 So we’re not going to see a sort of a recessionary spike in unemployment, even though job growth is going to be pretty slow.

 And then finally, in terms of the big macro picture on inflation, it’s going to heat up as tariff effects kick in. And then it will, you know, beyond that, by the time we get to the middle of the year, we’ll sort of be lapping those year-over-year tariff effects and then inflation should come down. 

So by the end of the year, I think we’re talking about a, you know, a two percent or less growth 2 percent inflation, 4 percent unemployment economy. And in some ways, at the end of 20 26, we’ll be back to 2024 to 2 percent growth, 0 recessions, 2 percent inflation, 4 percent unemployment. But getting there, there’s going to be some bumps along the way. And that’s really what I think is is most important for investors to think about. 

What about beneath the surface, David? You mentioned briefly the consumer and AI. What are some divergences?

 Yes, and that’s really where the center of these risks are. There’s such a divergence in this economy. So we’ve got this submarine sentiment. I mean, the latest reading we’ve seen from the University of Michigan Consumer Sentiment Index is the second lowest index reading ever going back to the 19 seventies. 

And this is a monthly survey. And people feel really, really grumpy. And at the same time, we’ve had this bubbly stock market. We’ve seen stock market valuations hit all time highs. 

We had multiple all time highs during this year. So we’ve got this divergence between a stock market, which is doing really well, and sentiment was doing really poorly. 

We’ve got a K-shaped economic expansion where if you actually look at the numbers, people at the top are doing much better in terms of wealth and income than people at the bottom. 

And then you’ve got this tension between kind of chaos in Washington, economic nationalism. Of course, we’ve just come past it. It had a shutdown. We’ve got all this tension emanating from Washington. 

And on the other side, we’ve got this huge technological tailwind because of advances in AI. And so we’ve got all these divergences going on and how these divergences are, how this is all reconciled. 

That really, I think, is quite possibly where a lot of the volatility in the year ahead is going to come from. 

And you mentioned Washington, all things D.C. What are your expectations for policy, including from the Federal Reserve? 

Very tricky. So first question, tariffs.

 I think there is still a big question as to what the Supreme Court will do with the so-called reciprocal tariffs.

 If they could just leave them in place, they have, you know, the administration has had a number of favorable rulings from the Supreme Court. They might get another one. Um, or they could repeal them if they, or say they were unlawful under the, the. 

1977 act. If they do throw out those, uh, those tariffs, I expect that the administration will try to impose other tariffs, but I don’t think they’ll get to the same amount. 

And so what will happen is I think you get income tax or tax refunds, not income tax refunds, tariff tax refunds paid back to U.S. importers. I think that’ll be a temporary surge for profits. 

And then whatever tariffs are imposed thereafter will probably be less than the tariffs that are going away. So if anything, that is a positive for corporate profits and for the economic outlook. 

I think there’s also the possibility that we are going into an election year, midterm elections. And as we approach it, it’s quite possible that the administration, Congress will propose some sort of tariff rebate or some stimulus check to the economy if they think the economy is going to be too slow going into the election.

 And that does change things a little bit because that could add to growth, but it could also add to inflation pressures. And one of my nightmare scenarios is you have this big stimulus check at a time where supply is really constrained because of all the tariff uncertainty.

 And you know what happens if you put stimulus in the economy when you’ve got a supply chain issue. You know what comes from that. And the Federal Reserve knows what comes from that. And that’s really That’s really where I think a lot of the hesitancy within the Federal Reserve is coming from. They do technically still think the policy is restrictive. 

The current federal funds rate is above the median expectation for FOMC members as to whether the federal funds rate should be in the long run.

 So they think policy is restrictive. But I think they are concerned that if they ease too quickly and then you put more stimulus in the economy, that inflation will never come down to 2 percent. And one thing that Jay Powell has made very clear is they are absolutely set on achieving that 2 percent inflation rate. And so a lot of competing Competing forces. 

I should come to some sort of resolution here. I do think that rates will gradually come down, but I don’t think we’re going to go below 3 percent by the end of next year. 

So maybe 3 more cuts between now and the end of next year. In terms of global central banks I’m sorry, I was going to ask you that. Yes, it was up to me to ask you a question. So, I mean, that is where we think the Federal Reserve is going. But what do you think about the rest of the world? Because, of course, that does impact the dollar. 

What are the other central banks going to do? 

That’s right. I think we’re in the age where there’s just a lot more divergence between what different central banks are doing. You’ve got those that are still in the later innings of normalizing or cutting interest rates. You’ve got those that already got there back to neutral, like the European Central Bank, and then you’ve got others that are still making a slow move upwards back to neutral. Bank of Japan is the key example. 

Overall, though, I think it suggests more of that narrowing in interest rate differentials, especially at the short end of the curve, which normally means a little bit more dollar weakness. 

But of course, this year, the magnitude of the dollar weakness was just extraordinary. The largest for the first half of the year since the 19 seventies. 

So going forward, I think it’s much milder dollar weakness over a multi-year process, but still an important change of trend. 

Yeah. And I know that’s in our long term capital market assumptions because it’s you know, we do have this prospect for somewhat slower U.S. growth in the long run and perhaps some diminution of U.S. exceptionalism. And we do think that ultimately the US central bank will be cutting rates a little bit more. And of course, one other question is with these tariffs. and trade, I really don’t think that all that’s happened in trade this year has been a very busy year for trade. 

I don’t think it’s going to make any difference to our big trade deficit. It’s still going to be there and that will still tend to put down pressure on the dollar in the long run. 

Yeah. And also this idea of, you know, this seems to be a very different market cycle with much broader participation, including of international equities. from a starting point of heavy concentration in U.S. assets. 

So as you get that rebalancing towards global markets, I think that’s another force pulling the dollar lower over time. So given that, what do you think about equities both in the United States and around the world? 

So I think for U.S. markets, of course, valuations are even higher than at the start of this year, which seemed difficult to imagine back in January. So the starting point is really challenging.

 But the good news is the fundamentals have been quite solid. We’ve seen double digit earnings growth this year, of course, still heavily tilted towards your mega cap tech companies. 

But you’ve also seen a reacceleration of earnings growth. in the X mag 7 part of the market, which is healthy to see. I think for next year, our focus is still on structural over cyclical themes within equities. As you were describing, not a lot of cyclical momentum there in the economy. 

So we would still prefer large caps over small caps and thinking about what sectors, what companies, have long-term stories. Part of that is a broadening of the AI theme to include other tech companies, other utility companies with the energy theme, industrial companies. 

And part of it is even including a sector like financials with banks, which was much more a turn in the regulatory cycle type of story. 

Otherwise, we would still be much more cautious on consumer names, as you were mentioning, a lot of bifurcation there by income level, as well as skeptical of areas of the market that need a big recovery like small caps. For international,

 I think that’s where look, there’s still so much room to run in the strong performance we’ve seen. It’s really a turn of the cycle for the dollar, for valuations, because it’s not your last decade’s international market. What’s really changed is earnings growth. 

So driven by much better structural stories overseas, think Europe, a lot of fiscal spending and defense and infrastructure.

 Think Asia with this AI theme can’t happen without passing through Asian companies, as well as the last thing I’d mention is much more of a focus on shareholders.

 Yeah, and I know in a few minutes, Jack, we’re going to chat with you about how investors are really offsides in terms of just not having that exposure to international, among a number of other things. 

But before I get there, we do need to think a little bit about fixed income also. I mean, I guess, you know, Fed easing, is that positive fixed income or how do you feel about fixed income in this environment? 

I think Fed easing is better than Fed hiking, that’s for sure, for fixed income. But we have to be careful in thinking about which rates move lower. It’s really a story about cash like rates moving a little lower, otherwise the rest of the curve settling in at this higher interest rate environment. 

So it’s about the income that you’re going to collect in fixed income. 

Yeah, I mean, you know, we’ve got a chart that I’m going to try and see if we can get into the next guide to the markets, which just looks at, you know, the yield curve over time. Well, guess what? It’s shallower than it has been over time. You’re not really getting paid for taking long duration bets here. And then credit spreads, both in high yield and high quality credit, those credit spreads are also tight. 

So it’s, you’re not really, I mean, fixed income is good because you’re getting decent income. And there’s, you know, people have forgotten that it’s, you know, I guess when you get double digit returns every year from equities, you Fixed income is its charm, but it’s hard to make a case for big duration or accredited bets in fixed income right now. And so much more of a short intermediate duration focus and remembering what fixed income is there for. It’s there for steady income, not double digit returns. That’s what risk assets are for. And it’s there for protection just in case you need it. If we’re wrong in our base case and there is a recession. 

OK, one last question for you before we turn it over to Jack to talk about asset allocation in this environment. How about alternatives? 

Yeah. So I think if we think about it from a top down level, there are some really interesting macro themes that feed through to private markets. So you mentioned overall resilient economic growth that still suggests low default rates for corporate credit, including private credit. 

But it’s resilient. It’s not strong. So you’re starting to see some little areas of a little bit more stress and private credit payment in kind, for example. extend and pretend amendment agreement. 

So I think it’s not the kind of environment where you want to take large scale bets on private credit and you want to be a lot more focused in the type of credit underwriting. 

Other macro themes that come through a little bit less, maybe uncertainty out of D.C. So that is a good thing normally for deals. So that’s something much better for private equity. 

You’ve got M&A back, IPOs. And then lastly, this idea of structural themes. especially around AI, a lot of that you can actually access in private markets, whether it’s venture capital, infrastructure with the power theme. So there’s a lot going on beneath the surface in alternatives. 

And I’d actually like to ask Jack about, before we start with stocks and bots, how about with private markets? How do you see that fitting in portfolios? Is it just defense?

 I think it’s interesting sort of right off the bat when we have conversations about private markets, alternatives, whatever you want to call them, we sort of think of them monolithically, like this idea that it’s just alts, it’s the other thing out there. 

When in reality, alternatives in particular are actually going to be a collection of a bunch of different disparate asset classes that really achieve different things. They function in different ways. And so when you’re having conversations about how to allocate 2 alternatives within portfolio construction, for me, I think the framework that probably makes most sense here is to have almost an outcome-oriented approach in the sense of like, what are you trying to solve for, right? 

And, you know, Gabby, you mentioned this idea of playing defense. You know, a lot of the reasons or a lot of the problems, I guess, you’d be solving for in portfolio construction that might be solved by alternatives are going to be a little bit more defensively oriented, right?

 I mean, maybe you’re looking for income in a portfolio since income in public markets is getting a little bit more challenging to find.

 I mean, We know, per the earlier conversation, the Fed likely easing at least a little bit more. I mean, we’re still beating inflation, but the delta there is not as nice as we’d like it to be.

 We know that dividend yields are evaporating in public equity, so it’s harder to In the U.S. In the U.S. I’m sorry. in the US, so it’s hard to find income in US and US public markets in general. 

Maybe you’re trying to solve for diversification, right? This idea that we think of bonds as being there, not just for the income, but also for protection. But in reality, when you look at what’s happened over the past 5 years or so, Stocks and bonds have largely trended in the same direction because while bonds can protect you against the stock market, or they can’t protect you against the stock market, at least not really right now, I do think that they can protect you against the economy and we haven’t had a recession yet. bonds have not seen that massive drop, which typically results in a corresponding price hike. So maybe you’re looking for the income. 

Maybe you’re looking for the diversification. That’s where that more defensive play towards alts might come from. 

Maybe it’s private credit, like you mentioned. Maybe it’s the income earning side of infrastructure. 

But there is also an offensive way, I would say, to play private markets, to play alternatives. And Some of that is going to be getting access to those exciting high growth, high octane companies.

 I mean, I’m sure all of us have had conversations where investors are raised their hands and asking, well, what about small cap public markets, right? Like, isn’t that where all the money’s at? 

And, you know, maybe 30 or 40 years ago, that’s where all the money was at. 

But nowadays companies are staying private for longer. 

And when they debut, if they debut, they’re debuting at much, much higher, higher valuations. it’s hard to capture that growth in in in public markets and so private markets when we think about private equity venture capital great opportunity for a way to sort of turbo charge your total return story your your performance and then of course when we think about this ai story which permeates everywhere i mean per the the title of our outlook you know david you mentioned it talking about the economy gabby you mentioned it talking about about the equity market Regardless of what you think about AI at the moment, it clearly has the potential to change the world. 

It’s just not changing it right now. And so the problem we see in public market exposure, at least, is pretty stretched valuations. You can approach that AI side of things sort of in a tangential way through private markets, in particular, something like infrastructure, because, you know, All that AI, all those large language models, they got to get power from somewhere. They’re extremely energy intensive. 

And so an investment in power infrastructure might be a really interesting way to play the AI theme without necessarily getting exposure to those more frothy, bubbly valuations that you see in public markets. I think it just sort of reminds me of 2 sort of challenges, which I think are worth overcoming in private markets. T

he first is you’ve got to figure out how do you add alternatives to portfolios. As you say, they are a very disparate bunch of assets, and you’ve really got to think about the correlations that these assets have with other parts of a portfolio. 

And so you really require some sophisticated portfolio analysis to figure out, okay, exactly what a mix of alternatives do I put in? Right. 

The other thing is, I know, Gaby, you mentioned this, the word underwriting. You know, we think about investing in very, we think about the companies, you know, we just invest in companies, but when it comes to private markets, it’s really just about, it’s as much about the quality of the underwriting on private credit as it is the quality of the company. 

It’s as much about the quality of the analysis in private equity. as it is about the quality of the company. 

You really have to have people who understand a balance sheet, who understand a property, who understand a business, and who are not going to overpay for it in order to do so. I think it’s who you invest with in private markets is so much more important than in public markets. Absolutely. No, very true. 

And on the public side, Jack, where do you see investors as most off sides based on the discussion we’ve been having? 

I mean, David, I think it was you that mentioned that, you know, bonds had sort of lost their luster when equities are doing double digit returns every year. I mean, you could extend that and say basically everything’s lost its luster compared to US large cap growth equities. I mean, that has been for a very long time. the place to be in public markets. And I would say for that reason, this idea of being a diversified investor, of owning different asset classes, of owning different regions, it had sort of been slowly but surely falling out of favor.

 You know, more and more investors letting their portfolios drift towards a really meaningful, significant overweight to US equities in particular. And in this year, 2025 is, as Gabby, you already discussed, right? A lot changed. I mean, I’m hesitant to say that bonds are backs. I feel like that’s a that’s a that’s a tough narrative sometimes. But look, I mean, bonds did very well this year. 

They did a lot better than a lot of people are used to them doing, especially in recent history. Foreign markets have have meaningfully outperformed in the developed world, in the emerging world to some extent as well, even within U.S. equities. know the magnificent 7 is still very much the dominant factor at play it accounted for what 50 percent of all the returns that we’ve seen this year which is insane but 50 percent is better than 55 percent which is where it was last year it’s better than 60 plus percent which is where it was the year before right so slowly but surely we’re seeing a a broadening out of participation and it means that those investors that let their portfolios drift over all these years got left off sides this year. And they’re a little bit nervous about that. 

They don’t want that to happen again.

 And that, I think, is enough of a reason to consider rebalancing, to consider rediversifying, to take advantage of this idea that bond yields might be structurally a little bit higher, that value equity in the US may play more of a role, that there have been real, meaningful structural changes in foreign markets that mean that they’re going to compete in a way that for a while they had challenged. And as we’ve just discussed, a whole lot of opportunities in alternatives that are continuously emerging.

 This, I think, is a very compelling time to be really sitting down and having those conversations about what are you trying to get out of this portfolio? Does your portfolio today reflect the views that you had when you built it however many years ago and is now a good time to diversify, not just into alts, but really within that public side of the portfolio too?

 Of course, glass half full is to say, all right, but I’ve done really well, concentrated part of my portfolio. So how exactly am I meant to diversify now without leaving too much money on the table and taxes? 

Yeah. I mean, the how to diversify conversation is sometimes even harder than the why to diversify conversation. And I think part of it, you know, David, you mentioned when you were talking about alternative assets, Manager selection is such an incredibly important part of that diversification story, right? 

I mean, saying, okay, I want to own some infrastructure in my portfolio, or okay, I want to own some private credit in my portfolio is only one step in that journey, right? Because if you pick the wrong manager in one of these spaces, not only will you likely be leaving money on the table, you might actively be losing money if you make the wrong bet. And while it’s not as important in public markets, it’s still pretty important in public markets, especially when you’re looking outside of those large cap U.S. equities. You look smaller cap, you look overseas, the role of active management plays that much more of a role. Manager selection plays that much more of a role. But then there is also, Gabby, to your point, the very real problem, which is that a lot of us that have been investing for a while have made a lot of money.

 And that doesn’t sound like a problem, but it is a problem if you’re looking to diversify because you have this in you have in many cases these these incredible uh capital gains embedded into into your portfolios and look if you are trying um to sell out of those large cap us growth stocks and diversify into foreign value companies or alternative assets or whatever it may be you’re gonna have a big fat tax bill and even though that means you made money nobody likes to see a big fat tax bill so we’re seeing more and more conversations more emphasis on this idea of being a tax conscious investor right thinking about tax management as you’re having those conversations about portfolio construction some of that can mean just choosing more tax efficient vehicles etfs are a great example of a way to be even passively more tax efficient right instead of a mutual fund etfs typically pay out lower capital gains at the end of every year because of the way they’re structured It also means that investors might want to embrace something that we refer to, the industry refers to as tax loss harvesting. 

This idea that, yeah, you got a lot of gains in your portfolios, but there might be some losses in there too. 

And why not realize those losses, kind of bank them against the gains, offset those gains, lower your net tax bill, and then reinvest the proceeds about a month down the line into a basket of securities that looks a lot like the one that you sold. And then your portfolio composition hasn’t changed a whole lot, but your tax base has been totally changed. 

And what you’re on the hook for at the end of the year ends up being a whole lot lower. And when we think about the opportunities to do that, it’s not just in down markets, which I think is something that might be a bit of a misconception.

 You know, you look at the S&P five hundred as an example, this year alone, right? 

Good year for the U.S. market. We’re up, what, 16, 17 percent. There have been about 350 companies within the S&P five hundred that have experienced a five percent pullback or more.

 So tons of opportunities to approach this this this idea of being more tax active, more tax conscious, even in an environment like this year or last year or the year before, where the U.S. markets post in double digit returns. What you keep is as important as what you make. 

Absolutely. 

Thank you so much, Jack, David. 

And please make sure to check out our 2026 year ahead outlook, AI lift and economic drift and waste actually focus on what we can control, which is that portfolio drift. Don’t worry, we’ll have more episodes coming soon. 

Thank you so much for joining us. 

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