Finimize - 💀 RIP, world's biggest dividend

What’s going on here?

Aramco said it’ll reduce its dividend payments – the world’s biggest – from last year’s $124 billion to $85 billion, in a move that could force Saudi Arabia to search the sofa for a lot of lost change.

What does this mean?

Brent crude, a key benchmark oil price, is trading for under $77 a barrel – well below the $90 that Aramco would likely need to keep dividends stable. Layer on the fact that the oil titan’s production is hovering near a three-year low, and Aramco simply can’t finance bumper payouts. The firm even dipped into cash reserves to make up the difference last year, but that left it owing more money than it had easily available. It’s a serious fall from grace: just a year ago, Aramco had $27 billion to spare.

Why should I care?

The bigger picture: Never get too comfortable.

Aramco’s cutback is a headache for Saudi Arabia. As the firm’s majority owner, the government relies on those dividends – not least to fund its “Vision 2030” project. The $1 trillion rebrand is designed to position the country as a global business hub – mainly by building futuristic cities and investing in AI, entertainment, and tourism. But if the government can’t count on Aramco to pay the bills, it’ll be forced to borrow even more money (and Saudi Arabia’s already issued more bonds than any other emerging market this year). That, or dig deeper into its sovereign wealth fund.

For markets: Your credit rating could be worse.
Saudi Arabia isn’t the only country resorting to borrowing cash: government debt is higher than ever around the world. The US is sitting on a $1.7 trillion deficit, Europe’s stretching budgets to finance green subsidies and defense, and emerging markets are issuing debt just to stay afloat. No wonder investors are flocking to safe-haven assets like gold, worried about the potential fallout if government debt spirals out of control.

What’s going on here?

China and Canada retaliated against American tariffs as soon as they started on Tuesday, while the US president risked souring more relationships in pausing military aid to Ukraine.

What does this mean?
Canada responded to America’s tariffs with fresh levies on $107 billion worth of US goods, while China targeted stateside agriculture and defense firms. Keep that back and forth up, and both sides risk toppling into a trade war that’ll lead to little but economic disruption. Plus, America’s freezing of military aid to Ukraine has blindsided European allies, forcing them to spend more on military support. That, at a time when the region’s budgets are already stretched and debt is high.

Why should I care?

For markets: Goldilocks’ perfect oatmeal is cooked.

All these political twists and turns could restrict both businesses and consumers, which explains why the US economy is now forecast to shrink by 2.3% this quarter. At the same time, those tariffs risk pushing inflation back into overdrive, which could lead to interest rates staying higher for longer. The knock-on effects of that include everything from rattled bond markets to an exacerbated government debt deficit. And the daunting prospect of a debt default is raising the odds of a more radical solution, à la Mar-a-Lago.

For you personally: Stock markets have left little margin for error.

US stock valuations are near record highs, investors have been supersizing the stocks slice of their portfolios, and just a few companies have been driving the market’s success. Put together, that leaves things in a precarious state – so now might be a good time to diversify. As well as stocks from places besides the US, you could look at bonds for recessions, commodities for inflation, and gold for an economic standstill. And you may want to brush up on momentum signals and options strategies, too, to better read the market and avoid any catastrophic losses.