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Illustration: Rebecca Zisser / Axios

Stock markets are at record highs, and recession is nowhere in sight. Yet, the threat to all this exuberance — rising international tensions and instability — arguably looks greater than any years since last century's great wars. This is the core of my six geopolitical forecasts for 2018.

Quick take: What stands out is the brittleness of politics across the planet — in Iran, the Korean peninsula, Russia and Saudi Arabia, to name a few flash points. A wrongly lit match involving any of them could turn disastrous.

Threat level: High. The biggest danger is miscalculation — because the combination of high-stakes politics, willful leaders needling each other, and unpremeditated error might be fateful. One only need consider Hawaii's mistaken Jan. 13 warning of an impending ballistic missile strike to recognize the perils when leaders must make fast decisions with imperfect intelligence.

This is the sixth year of these forecasts. I base them on 15 common-sense guidelines that reflect how people have tended to behave over time. (Here are the first 14, and the 15th is the Rule of Miscalculation).

1. The U.S. will opt to live with North Korea's nuclear status

One sign of President Trump's flexibility was a Jan. 4 tweet, in which he crowed that his being "firm" had driven the north to the negotiating table with the south. This is a man seeking an exit from conflagration. The main working dynamic here is the Precipice Rule, which says that sides will squawk, shout and threaten but back away before a cataclysm.

Bottom line: As long as Trump feels he can credibly claim to have "won," that's what he's likely to do — scream, threaten, but ultimately let Kim Jong-un get away with a long bout of negotiations with the south while keeping his nuclear technology.

2. Key wild card: A show of muscle in North Korea

This is the most obvious reason for emphasizing the Rule of Miscalculation: Trump could order a limited lightning strike on North Korea. U.S. Defense Secretary Jim Mattis has said that any nuclear confrontation with the north "would be catastrophic," but the NYT reports that the military is prepping for war just in case, and the WSJ notes that some Trump advisers believe a "bloody nose" could punish Kim without leading to a full-scale retaliation.

Bottom line: The True Believer Rule would be operative in such a strike. Given a zealous or messianic personality, this rule which says events can be determined at the extremes — can overcome the others.

3. Khamenei will climb down — a tad

Ayatollah Khamenei, Iran's supreme leader, is feeling rightly threatened by the breadth and source of last year's popular uprising — not the disdained Tehran elite, but a cross-cut of Iranian society in the conservative hinterlands. Khamenei can react by continuing to crack down hard, but that approach will continue to corrode the regime's self-definition as a revolution of the people.

Bottom line: Khamenei wants a virtuous regime: one that stays in power, and does so with the visible support of the Iranian people. (See the Staying in Power Rule.) Do not look for changes in Iran's aggressive regional policies. But inside Iran, Khamenei will adopt a softer touch.

4. Elon Musk will have a good year

Last July, the Tesla CEO could have averted much personal misery by postponing the release of his game-changing, mainstream Model 3, and instead released it, say, a year late. Instead, Musk has made himself look unreliable with an excruciatingly slow production buildup.

That will change this year: Tesla will finally fix what ails factory automation, and churn out Model 3s at promised volume.

Bottom line: Will the market forgive him? Yes.

5. The big tech uprising will go populist

People love their iPhones, adore Facebook, and could not do without either Google or Amazon. So why would these companies become an object of scorn in the American heartland? Because:

  • Last year, Washington politicians spent many months lashing out at Facebook, Twitter and Google over Russian meddling, thus making it safe to take on the tech giants.
  • Local politicians want to win in November, and a carefully tailored fight could be a tried-and-true way to do it. One example is Josh Hawley, Missouri's Republican attorney general and U.S. Senate candidate, who launched an anti-trust investigation against Google.

Bottom line: Look for criticism of big tech to be a campaign platform for both parties in numerous elections at the state level.

6. The mid-terms

For Trump, the stakes in this year's mid-term elections could barely be higher. If Democrats capture the House, which seems likely, they almost certainly will tie up Trump by blocking his agenda, investigating him, and initiating impeachment proceedings. If they win the Senate, too — not likely, but not far-fetched, either — the Trump presidency as we know it will be over.

For Democrats, the stakes are also existential: if Republicans keep control of Congress, Trump will spend the next two years continuing to dismantle anything with Barack Obama's name on it, and then go after FDR's New Deal legacy.

Bottom line: The Rule of Averages is primarily at play here. It states that people can embrace wild bouts of extremism but tend to drift back toward the middle and seek thriving and stable futures for themselves and their children.

Go deeper

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Photo: Mandel Ngan/AFP via Getty Images

President Trump will give a farewell video address on Tuesday, saying that his administration "did what we came here to do – and so much more."

Why it matters, via Axios' Alayna Treene: The address is very different from the Trump we've seen in his final weeks as president — one who has been refusing to accept his loss, who peddled conspiracy theories that fueled the attack on the Capitol, and who is boycotting his successor's inauguration. 

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Expand chart
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Why it matters: It only took a little over a month for the U.S. to reach this mass casualty after 300,000 COVID deaths were reported last month. That's over 100,000 fatalities in 36 days.