Why Crypto Is An Important Asset Class For Millennials

Darius recently joined Charles Payne on Fox Business to discuss the impact of last week’s FOMC decision and Chair Powell’s press conference, the outlook for liquidity, how to invest successfully during this Fourth Turning, and more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio:

While the Fed’s reaction function remains dovish, we believe it is likely no longer asymmetric. With the Fed now adopting a more balanced assessment of risks, the responsibility shifts back to us as investors to accurately forecast where the labor market and inflation are headed, as these will ultimately determine policy decisions.
The outlook for US liquidity remains positive. As long as the Democrats do not extend or eliminate the debt ceiling during Biden’s administration – and it appears they will not – the Treasury General Account balance is likely to be spent down to zero within the first four to five months of 2025. This development would be bullish for asset markets.
The current Fourth Turning is defined by factors such as excessive fiscal policy, monetary debasement, and financial repression. This macroeconomic backdrop is structurally bullish for stocks, credit, cryptocurrencies, and commodities. It is structurally bearish for Treasury bonds and the U.S. dollar. We believe the crypto asset class holds significant importance for Millennials because they recognize that the current system is not working in their favor, and investing in crypto is a “calculated gamble” on an alternative future in which the gap between the haves and have-nots is much narrower.

Since our bullish pivot in November 2023, the QQQs have surged 42% and Bitcoin is up +167%.

If you have fallen victim to bear porn and missed part—or all—of this rally, it is time to explore how our KISS Portfolio Construction Process or Discretionary Risk Management Overlay aka “Dr. Mo” will keep your portfolio on the right side of market risk going forward.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass.

No catch, just high-quality insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

What Must Be Done To Prevent DOGE From Failing?

Darius recently sat down with FFTT Founder and President Luke Gromen to discuss how marketable U.S. treasury market dynamics have shifted over recent years, the likelihood of a meaningful reduction in the federal budget deficit in this Fourth Turning, and more.

If you missed the interview, here are the two most important takeaways from the conversation that have significant implications for your portfolio:

1. How Have Changes In Ownership Structure Contributed To Price And Yield Dynamics In The Treasury Market?

At 42 Macro, one of the ways we analyze the marketable U.S. Treasury market is by segmenting it into various investor cohorts:

The Federal Reserve: The Fed’s share has been declining due to balance sheet runoff, peaking at 25% in late 2021 and now at only 15% of total marketable Treasury securities.
Commercial Banks: Banks’ market share decreased from early 2022 until late 2023, when it began to stabilize. This stabilization was driven by programs like the Bank Term Funding Program (BTFP) and expectations that the Federal Reserve would dramatically lower interest rates. Currently, their share is around 15%, well south of the peak of 33% in 2003.
Foreign Central Banks: The decline in global trade and the steady shift away from global dollar recycling led by the BRICS member nations caused foreign central banks’ share to steadily decline to 14% from a peak of 40% during the 2008 global financial crisis.
Global Private Non-Bank Sector (Investors): This cohort has become the largest holder of marketable U.S. Treasury securities, with its share increasing from 36% in late 2021 to 55% today.

This shift in ownership has structurally altered the Treasury market. Unlike banks—such as the Fed, foreign central banks, and commercial banks which purchase Treasurys to satisfy policy or regulatory mandates (e.g., Dodd Frank, Basel III and IV)—global investors demand ex ante returns to compensate for taking risk in their portfolios.

As a result of this seismic shift, upward pressure on yields has intensified, signaling a more acute phase in the evolution of Treasury market dynamics and expectations.

2. How Likely Is Significant Reduction In The Federal Budget Deficit During This Fourth Turning?

Our analysis of U.S. federal budget dynamics highlights significant challenges to achieving meaningful deficit reduction.

First, U.S. federal expenditures currently represent roughly a quarter of U.S. GDP—the highest share since at least 1970 excluding COVID and the GFC. Thus, significant cuts would likely catalyze a downturn in the economy—however beneficial a smaller government would be in the long run, which is something both Darius and Luke agree with. Per Luke, the last three recessions saw the U.S. federal budget deficit widen by 600bps, 800bps, and 1,200bps.

Secondly, our research indicates that approximately 90% of the budget is effectively untouchable. This “Aggregated Untouchables” category includes “True Interest Expense”—comprising Medicare, National Defense, Net Interest, and Social Security—along with Medicaid, Welfare, and Veterans’ Benefits. Collectively, these expenditures represent programs unlikely to face cuts under the current pro-populist political climate and are compounding at a rate of +3% per year (+13% per year in the “True Interest Expense” category). The remaining 10% of the budget, which largely includes discretionary spending, amounts to just over $700 billion and has already been shrinking at a compound rate of -15% per year over the past three years.

Lastly, demographic trends are exacerbating the fiscal burden. By 2025, 160,000 people will join the retirement-age population each month, compared to just 32,000 entering the working-age population.

Given these dynamics, meaningful deficit reduction appears improbable without tackling politically protected categories. This leads us to believe that meaningful austerity is an unlikely path forward in the context of this current Fourth Turning environment—especially without a significant devaluation of the US dollar preceding it.

Since our bullish pivot in November 2023, the QQQs have surged 42% and Bitcoin is up +190%.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass.

No catch, just high-quality insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

Why Tariffs Are Much Worse For Investors Than You Likely Realize

Darius recently sat down with Bleakley Financial Group CIO Peter Boockvar to discuss the impact of the Trump administration’s proposed tariffs, insights from the 42 Macro Positioning Model, and more.

If you missed the interview, here are the two most important takeaways from the conversation that have significant implications for your portfolio:

1. What Are The Second And Third Order Effects Of Tariffs And How Might They Cause Problems For Asset Markets?

According to data from the Committee for a Responsible Federal Budget, the Trump administration’s proposed tariffs are expected to generate nearly $3 trillion in revenue to help offset the ~$4+ trillion cost of permanently extending the Tax Cuts and Jobs Act (TCJA).

We believe the market is underestimating both the likelihood and scale of these tariffs given that the Congressional budget reconciliation process – specifically the Byrd Rule – will require pay fors to offset the lost revenue from tax cuts. An equally important but often overlooked factor is the potential for retaliation, particularly from China.

Historical examples, such as the Trump-era trade war, illustrate how heightened tariffs can lead to significant devaluations of the Chinese yuan. If this pattern repeats, it is likely to trigger competitive devaluations among other major currencies, resulting in an excessively strong U.S. dollar. In our view, such dollar strength is likely to suppress global capital formation and weigh heavily on U.S. corporate earnings, ultimately creating a significant headwind for asset markets.

2. What Insights Does The 42 Macro Positioning Model Provide About The Current State of Asset Markets?

Our 42 Macro Positioning Model analyzes a 15 long-term time series, comparing their current levels to the median values observed at major bull market peaks and troughs. Currently, the model indicates several red flags for positioning and sentiment:

AAII stock allocation exceeds the median value observed at major bull market peaks in the seven market cycles since Jan-98.
AAII cash allocation is also below the median value observed at major bull market beaks.
S&P 500 realized volatility—an inverse proxy for systematic fund exposure—is below the median value seen at prior bull market peaks.
S&P 500 implied volatility correlations—an inverse proxy for market-neutral hedge fund exposure—is below the median value seen at prior bull market peaks.
S&P 500 price/NTM EPS ratio sits in the 95th percentile of all historical data, dating back to the late 1980s, and is well above the median value observed at major bull market peaks.
Investment-grade credit spreads are in the first percentile of all historical data, also dating back to the late 1980s, and are well below the median value observed at major bull market peaks.

From a positioning perspective, although these metrics do not necessarily serve as immediate catalysts for reversing the bullish momentum of risk assets, they represent significant potential energy once bearish catalysts emerge. When momentum does reverse, we believe positioning is asymmetric enough to unwind in an aggressive-enough manner to cause a stock market crash.

Since our bullish pivot in November 2023, the QQQs have surged 48% and Bitcoin is up +203%.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass.

No catch, just high-quality insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

What Are the Biggest Risks To Investors As This Fourth Turning Evolves?

Darius recently sat down with Michael Gayed from Lead-Lag Report to discuss how the 42 Macro Investment Process differs from other approaches, inflation, the likelihood of a meaningful federal budget deficit reduction under President Trump, and much more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio:

1. How Does The 42 Macro Investment Process Differ From Other Traditional Approaches?

At 42 Macro, we take a fundamentally different approach to investment research and risk management.

While many investors rely on predictions, reacting only after those predictions are invalidated by subsequent macro or micro data, we utilize a Bayesian inference process that focuses on nowcasting evolving market conditions to inform our and our clients’ asset allocation and portfolio construction decision-making.

By embracing this Bayesian inference process, we deliver actionable insights that drive better outcomes for our clients. We believe that success in today’s market requires constant observation, adaptability, and the discipline to question assumptions. That is what we do at 42 Macro, and it is why thousands of investors worldwide achieve better investment outcomes with our proven risk management overlays (KISS and Dr. Mo).

2. Will The Fed Achieve Its Inflation Mandate Anytime Soon?

In short, no. We conducted a deep-dive empirical analysis of the business cycle, examining the median path of various indicators relative to recessions.

Our research indicates inflation is the most lagging indicator of the business cycle, historically breaking down durably below trend only four to five quarters after a recession begins.

Based on our deep understanding of how the business cycle works, we do not see a high probability of recession in the medium term. That implies inflation is unlikely to decline significantly from here and may even accelerate in the coming quarters.

3. How Likely Is Significant Federal Budget Deficit Reduction Under President Trump?

Our research indicates that key government spending areas—Medicare, National Defense, Net Interest, and Social Security—comprise 61% of total federal expenditures.

When including additional categories like Medicaid, Welfare, and Veterans’ Benefits—programs unlikely to face cuts under the current political climate—90% of the federal budget becomes effectively untouchable.

The remaining spending accounts for only approximately 10% of federal expenditures. Even if cut entirely, the deficit would still be -4% of GDP, making a balanced budget highly improbable without addressing politically untouchable categories. As a result, we believe a meaningful deficit reduction is unlikely under President Donald Trump – or any president for that matter in a Fourth Turning.

Since our bullish pivot in November 2023, the QQQs have surged 43%, and Bitcoin is up +176%.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass.

No catch, just high-quality insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

What Are The Hidden Dangers Looming Over Asset Markets?

Darius recently sat down with Anthony Pompliano to discuss the risks of a stronger US dollar, a potential global refinancing air pocket, and more.

If you missed the interview, here are the two most important takeaways from the conversation that have significant implications for your portfolio:

1. How Can A Stronger US Dollar Cause Problems For Asset Markets?

Our research indicates one significant implication of a strong US dollar is that it pressures foreign investors to repatriate dollar-denominated assets to service the 70% of global debt and 60% of cross-border lending that rely on the US dollar.

The events of 2022 provide a clear example of the potential consequences in such an environment. During a major US dollar rally from January to September of that year, the dollar appreciated by 18%, leading to a reduction in liquidity and severe declines across asset classes, as Gold fell 10%, US equities dropped 25%, US Treasury bonds declined 31%, and Bitcoin plummeted approximately 58%.

Moreover, tariff policies introduced by the Trump Administration, along with potential changes in the Treasury’s net financing policy, may accelerate dollar strength. Coupled with ongoing US economic exceptionalism—driven by tax cuts and deregulation—these factors could push the dollar even higher, increasing the pressure on markets and global financial stability.

If the Federal Reserve’s policy options are constrained by a resilient economy or persistent inflation, it may struggle to prevent the dollar from trending higher, creating significant challenges for asset markets.

2. Is A Global Refinancing Air Pocket On The Horizon?

At 42 Macro, we conducted a deep-dive empirical study on the global refinancing cycle and found it is, in fact, a key leading indicator of global liquidity.

By tracking the year-over-year growth rate of world total non-financial sector debt, lagged by four and a half years to align with typical refinancing timelines, we observe a strong correlation with fluctuations in global liquidity growth. Currently, the lagged growth rate of global non-financial sector debt is accelerating sharply, and our models project this trend to continue through late 2025.

While conventional wisdom suggests this is likely to catalyze an increase in global liquidity, the risk remains that liquidity may fail to expand meaningfully, thus creating a global refinancing air pocket, similar to the divergences observed in 2008-2009, 2011, 2015-2016, 2018-2019, and 2022. If global liquidity fails to follow the path of the year-over-year growth rate of world total non-financial sector debt, we believe it is likely to lead to severe disruptions—or even a meltdown—in global financial markets, negatively impacting asset markets along the way.

Since our bullish pivot in November 2023, the QQQs have surged 44% and Bitcoin is up +184%.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass.

No catch, just high-quality insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

Decoding The Macro Puzzle

Darius recently joined Sebastian Purcell on Real Vision to discuss how to utilize key economic cycles to anticipate Market Regime shifts, our “Resilient US Economy” theme, global liquidity, and much more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio:

1. What Role Do Economic Cycles Play in Navigating Market Regimes?

At 42 Macro, we analyze six key economic cycles—growth, inflation, policy, corporate profits, liquidity, and positioning—to assess the sustainability of the current Market Regime and anticipate future shifts.

These cycles do not directly dictate our clients’ portfolio positioning, but they do provide context for how our core risk management signals – KISS and Dr. Mo – might evolve in the future.

By analyzing where we stand within each cycle, investors can assess the durability of the current Market Regime and prepare for potential changes across various time horizons.

2. How Does The US Economy’s Shrinking Reliance On The Manufacturing Sector Contribute To Our “Resilient US Economy” Theme?

One key pillar of our 28-month-old “Resilient US Economy” theme is the US economy’s limited reliance on the manufacturing sector, which has historically been the most cyclical part of the economy.

Manufacturing’s share of nominal GDP has declined from 28% in the 1950s to just 10% today. Furthermore, its share of total nonfarm payrolls has dropped from 44% in the 1940s to 14%.

Unlike manufacturing, the services sector—driven by population growth and migration—rarely contracts, providing stability and cushioning the economy from the sharp downturns often seen in manufacturing-led recessions.

The manufacturing sector has accounted for a median 98% of net job losses during postwar US recessions. Thus, limited exposure to the more-cyclical manufacturing sector equals limited risk of an economic downturn. It is not clear to us why so many investors failed to anticipate this obvious upside risk in the data.

3. What Is The Outlook For Global Liquidity?

At 42 Macro, we track global liquidity using our Global Liquidity Proxy, which aggregates global central bank balance sheets, global broad money supply, and global FX reserves (excluding gold). We then add a global bond market volatility overlay to simulate the impact of the expansion and contraction of the global repo market.

Our research also indicates there are leading indicators of global liquidity, such as equity and crypto market caps, US dollar, FX volatility, interest rates, fixed income volatility, and global growth, inflation, and employment.

Currently, our model analyzing those indicators indicates a modest increase in global liquidity over the medium term, suggesting the supportive backdrop for asset markets is likely to persist into early 2025.

Since our bullish pivot in November 2023, the QQQs have surged 43% and Bitcoin is up +175%.

If you have fallen victim to bear porn and missed part—or all—of this rally, it’s time to explore how our KISS Portfolio Construction Process or Discretionary Risk Management Overlay aka “Dr. Mo” will keep your portfolio on the right side of market risk going forward.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass. No catch, just high-quality insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

Will Gold Protect Your Wealth Better Than Bonds Over The Long Term?

Darius recently joined Gavekal’s David Hay to discuss the current Fourth Turning, #inflation, the relative attractiveness of Treasury Bonds and Gold, and much more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio:

1. How Can Understanding Fourth Turning Economic And Policy Dynamics Help Investors Position Their Portfolios?

At 42 Macro, we conducted a deep-dive empirical study on Fourth Turnings to identify trends across economic, market, and policy indicators during these transformative periods.

Our research revealed that Fourth Turnings are consistently marked by explosive growth in sovereign deficits, rising debt levels, expanding government size, and soaring costs of financing deficits. These periods also see a sharp deterioration in sovereign fiscal balances—a trend already unfolding in the current Fourth Turning.

As investors, understanding how these indicators are likely to behave during Fourth Turnings is essential to properly positioning your portfolio and staying on the right side of market risk.

2. How Does Inflation Typically Behave In Fourth Turnings?

Our analysis of Fourth Turnings reveals that Democrats have historically emphasized government social benefits to supplement household incomes, while Republicans have prioritized lowering corporate tax rates. These opposing approaches have converged to fuel the accumulation of significant public debt.

We foresee the Federal Reserve is likely to be drawn into the equation, effectively forced to monetize rising public sector debt and deficits.

We believe the explosive growth of public sector debt plus the Fed’s likely choice to monetize a considerable portion of that debt is likely to catalyze sustainably above-trend rates of inflation, aligning with our research that indicates inflation tends to accelerate sharply during Fourth Turnings.

3. How Can Investors Best Protect Their Wealth Against Explosive Growth In Sovereign Debt And Sustainably Above-Trend Inflation?

Our KISS Portfolio Construction Process is our systematic trend-following strategy designed for retail investors, with a core allocation of 60% Stocks, 30% Gold, and 10% Bitcoin.

Recently, we pivoted from Treasury Bonds to Gold, which we believe is a better choice for investors in the context of the current Fourth Turning. Gold has consistently performed well across various Market Regimes, serving as a reliable hedge against inflation and economic uncertainty—particularly during Fourth Turnings, when sovereign debt and inflation tend to surge.

Since our bullish pivot in November 2023, the QQQs have surged 40% and Bitcoin is up +174%.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass.

No catch, just macro insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

Will Risk Assets Power Ahead Into And Through Year End?

Darius recently joined Paul Barron on the Paul Barron Network, where they discussed 42 Macro’s three bullish fundamental themes, the key economic cycles that lead asset markets, and more.

If you missed the interview, here are the two most important takeaways from the conversation that have significant implications for your portfolio:

1. When Should Investors Brace For A Significant Market Downturn?

We remain confident in the fundamental bull base for asset markets through early-Q2.

Our outlook is supported by three of our four core fundamental themes:

Our “Resilient U.S. Economy” theme, which we authored in September 2022.
Our “Here Comes The Liquidity” theme, which we introduced in September 2024.
Our “Jay Wants A Soft Landing” theme, which expresses our view that the Fed has an asymmetrically dovish reaction function that is geared towards engineering a soft landing in the US economy.

Combined, these three themes suggest increased liquidity, upside surprises in growth, and an accommodating Federal Reserve – all factors that indicate a favorable environment for risk assets over the medium term.

However, looking beyond Q2 2025, we anticipate asset markets are likely to face downside risks, such as a global refinancing air pocket. TBD on that.

2. What Implications Do Sidelined Cash And Growing Credit Stress Among Retail Consumers Have For Asset Markets?

Our empirical research shows that credit delinquencies and “cash on the sidelines” have limited significance in the current market context because they are lagging indicators. Historically, these factors shift after broader asset markets and the overall economy have moved.

In contrast, our deep-dive empirical study of business cycle dynamics has identified four key cycles that consistently lead asset markets:

Policy
Liquidity
Growth
Corporate Profits

These cycles are the primary drivers behind significant swings in asset markets. While real-time data on these factors is not always available, developing an informed perspective on their trajectories enables a more credible and forward-looking approach to anticipating market movements.

Since our bullish pivot in November 2023, the QQQs have surged 39%. Momentum $MTUM is up +51% and Bitcoin is up +184%.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass.

No catch, just macro insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

Is The Fed On The Precipice Of Another Major Policy Mistake?

Darius recently hosted Unlimited Funds CEO Bob Elliot on this month’s 42 Macro Pro to Pro, where they unpacked the Fed’s asymmetrically dovish reaction function, the impact of the work-from-home phenomenon, their systematic approaches to investing, and more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio:

1. What Is Driving the Fed’s Expansionary Monetary Policy?

We authored our “Resilient U.S. Economy” theme in September 2022, and since then, we have identified a new contributing pillar: the continuation of expansionary monetary policy.

We believe this policy direction is puzzling, driven largely by the Fed’s belief that no further cooling in the labor market is needed to achieve 2% inflation—a stance we view as highly likely to be inaccurate. Nevertheless, it remains the Fed’s current perspective.

Bob Elliot offered an insightful take on this issue, suggesting that the Fed’s position likely stems from a fundamental disconnect between how academics interpret markets and models versus how practitioners do. This divergence may explain their controversial outlook on the labor market’s role in achieving their desired inflation target.

2. How Is The Work-From-Home Phenomenon Affecting Labor Market Dynamics?

At 42 Macro, we monitor various workforce dynamics metrics, including Nonfarm Productivity Growth and the Private Sector Quits Rate. Our analysis shows that Productivity Growth is currently above trend, while the Private-Sector Quits Rate has declined significantly from its elevated levels over the past couple of years.

We believe this shift toward longer employee tenures is likely a key driver behind the current above-trend rate of productivity growth, as longer retention generally leads to greater employee efficiency. This increased productivity is helping to offset some of the inflationary pressures stemming from higher wages and income growth, and we believe it is likely to persist.

Additionally, the rise of remote work plays a significant role in this dynamic. With the flexibility to live and work from virtually anywhere, employees are more likely to stay with their current employers, further contributing to lower turnover and increased productivity.

3. Why Did We Replace Core Fixed-Income Exposure with Gold in Our KISS Portfolio?

One of the recent adjustments we made in our systematic KISS Portfolio Construction Process was to replace our core fixed-income exposure with gold. This decision reflects our understanding that if our Investing During A Fourth Turning Regime analysis proves true over the long term, it is highly unlikely that bonds will outperform other assets on a real, risk-adjusted basis.

While we recognize that no one—including us—is ever 100% correct on their fundamental views, even partial accuracy in our predictions suggests a strong likelihood that assets like gold, Bitcoin, stocks, and real estate will prove to be far better hedges against accelerated monetary debasement and financial repression than bonds. Indeed, we expect monetary debasement and financial repression to be tools that the Fed employs to address the challenges of excessive sovereign debt and a robust economy that leaves little incentive for buyers of government bonds.

Given this dynamic, we pivoted entirely out of core fixed-income exposure and allocated that portion of our systematic KISS Portfolio Construction Process to gold in October. Our 60/30/10 trend-following strategy now features maximum allocations of 60% stocks, 30% gold, and 10% Bitcoin.

Since our bullish pivot in November 2023, the QQQs have surged 37%. Momentum $MTUM is up +48% and Bitcoin is up +169%.

Thousands of investors around the world confidently make smarter investment decisions using our clear, accurate, and affordable signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass.

No catch, just macro insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

Will AI Replace Humans In Investing?

Darius recently hosted QuAIL Technologies CEO Andrew Fischer on this month’s 42 Macro Pro to Pro, where they took a deep dive into AI’s future impact on the financial services industry.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio:

1. Will AI Replace Investment Professionals?

While many financial services professionals fear this, Andrew believes AI will not replace them. Instead, it will become a powerful tool every investor uses in some form.

Common applications of AI include accelerating workflows and increasing productivity by enhancing systems like report generation and client-stakeholder communication. AI’s ability to analyze vast amounts of data gives humans a competitive edge.

AI will not replace people; rather, people using AI will replace those that do not.

2. How Will AI Impact Investors’ Lives?

Andrew Fischer shared a compelling example from QuAIL Technologies, where AI is used daily to help investors manage the overwhelming volume of information they encounter.

Each morning, QuAIL’s AI agents analyze around 5,000 articles—well before they have had their first cup of coffee.

Humans can not realistically process that many articles in such a short time nor retain or act on the insights while they are still relevant. But with AI, investment professionals can quickly access refined, relevant insights from thousands of sources. This means that by the start of their day, they already understand the latest fundamental and technical developments and their potential impact on their portfolios, giving them a strategic edge over other market participants.

3. How Can AI Enhance Repeatable Investment Processes?

One area where AI shows significant promise is in assisting the process of identifying Market Regimes. Andrew has explored concepts like geometric fractals and statistical self-similarity – research that suggests that the factors defining each regime can change over time. By incorporating AI, investors can track these shifts in explanatory variables, continuously adjusting the models used to capture these evolving patterns.

AI also helps investors ensure they are focused on the most predictive factors for identifying market regimes. With AI, a system can iterate and refine its understanding of market dynamics.

Since alpha naturally decays over time, this continuous improvement and stress-testing of models is essential. AI can play a transformative role in streamlining such procedures, thus preserving and enhancing our and every investor’s investment approach.

Since our bullish pivot in November 2023, the QQQ has surged nearly 30%.

If you have fallen victim to bear porn and missed part—or all—of this rally, it’s time to explore our KISS Portfolio Construction Process or Discretionary Risk Management Overlay aka “Dr. Mo” signals that have a proven track record of keeping your portfolio on the right side of market risk.

Thousands of investors around the world confidently make smarter investment decisions using our clear, actionable, and accurate signals—and as a result, they make more money.

If you are ready to learn more about how our clients incorporate macro into their investment process and how you can do the same, we invite you to watch our complimentary 3-part macro masterclass. No catch, just macro insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.