To Survive The Fourth Turning, You Must Listen To The Market
Darius sat down with our friend Charles Payne on Fox Business last week to discuss the impact of the Fourth Turning on the economy and asset markets.
If you missed the interview, here is the most important takeaway from the conversation that has significant implications for your portfolio:
During This Fourth Turning, Public Debt Growth Is Likely to Vastly Exceed Current Projections. The Only Institution With A Balance Sheet Large Enough to Finance This Is The Federal Reserve—And They Will.
- Income inequality typically breaks down during a Fourth Turning, driven by wealth redistribution through populism. We believe this trend is likely to persist throughout this Fourth Turning.
- We believe global liquidity is likely to increase over the medium term. The Federal Reserve is cutting policy rates despite Super Core inflation remaining 200 basis points above their target, showcasing their asymmetrically dovish reaction function. Combined with our ‘Resilient U.S. Economy’ theme, which we authored in September 2022, we see strong potential for upside in asset markets over the medium term.
- During a Fourth Turning, it is generally wise for investors to long risk assets such as stocks, credit, crypto, commodities, and gold. Additionally, we recommend investors avoid large positions in Treasury bonds, as we believe inflation is likely to remain persistent and growth relatively stable.
That said, risk assets will NOT appreciate throughout the Fourth Turning in a straight line. There will be significant drawdowns to risk manage along the way – perhaps as painful as the Dot Com Bust, GFC, or COVID crash.
Fortuitously, 42 Macro clients have access to our KISS Portfolio Construction Process and Discretionary Risk Management Overlay aka “Dr. Mo” to help them successfully navigate their portfolios throughout these increasingly trying geopolitical times.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 the 42 Macro universe.
Navigating Inflation, Budget Deficits, and Global Monetary Shifts
Darius recently hosted our friend Nadine Terman on 42 Macro’s Pro to Pro, where they discussed inflation, the federal budget deficit, China, 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. Are Both Political Parties Likely to Increase The Federal Budget Deficit?
Even if Republicans win and Elon Musk advocates for severe spending cuts, we believe those cuts are unlikely to materialize. While there may be headlines about cutting spending, slashing large portions of the budget carries significant career risk.
Our research shows that the type of wasteful spending Musk might target accounts for less than 1% of federal expenditures. Meaningful cuts would require reductions in defense, Medicare, or Medicaid—areas deeply important to American voters.
Some minor budget trims may occur, but both parties appear committed to profligate spending, with no clear plan to meaningfully reduce the national debt.
2. How Has The Recent Shift In U.S. Monetary Policy Affected Chinese Policymakers?
At 42 Macro, we monitor the growth of the PBOC’s balance sheet relative to the share allocated to FX reserves. When the yuan appreciated sharply in early 2015, its real effective exchange rate (REER) rose significantly, disrupting China’s export model.
As the Yuan became expensive on a REER basis, export growth secularly slowed and foreign direct investment into China slowed, reducing the expansion of its manufacturing base. As a result, the share of FX reserves declined from approximately 83% to just 50% since March 2014.
However, the recent shift to a more neutral U.S. monetary policy, evidenced by the Fed’s decision to implement a 50-basis-point rate cut, suggests less risk of severe yuan devaluation. This change has signaled to Chinese policymakers that they can now begin accelerating monetary expansion.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 the 42 Macro universe.
Why Listening to The Market Beats Macro Predictions Every Time
Darius recently sat down with our friend Jason Shapiro from Crowded Market Report, where they discussed how to effectively use macro, the 42 Macro investment process, the outlook for China, 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 The Optimal Way to Incorporate Macro Into An Investment Strategy?
We would argue that many investors incorrectly incorporate macro into their investment strategy because they are not paying enough attention to what the market is signaling.
One of the most advanced tools we have developed for our clients is our Global Macro Matrix, which allows us to nowcast the current Market Regime and analyze what the market is signaling at any given moment. The tool also allows us to spot durable inflections in asset market momentum in real-time, thus providing 42 Macro clients the best chance to remain on the right side of market risk.
This insight is crucial because the Market Regime dictates dispersion within and across asset classes, ultimately shaping the returns we all experience as investors. By following what the market tells us, we can help our clients align their portfolios with what the market is actually trying to price in, not with what they hope it prices in. Note the difference.
2. What Proven Quantitative Techniques Influence The 42 Macro Process?
At 42 Macro, we stand on the shoulders of giants who came before us. Our research incorporates strategies that have stood the test of time on global Wall Street:
- Regime Segmentation – Introduced by Ray Dalio in the 1970s
- Bayesian Inference – Applied to Wall Street by Daniel Kahneman and Amos Tversky in the early 2000s
- Volatility as a Leading Indicator for Price – Pioneered by Benoit Mandelbrot in the late 70s and early 80s
Our investment approach leverages these proven quantitative techniques, allowing us to deliver superior outcomes that meet our clients’ needs more effectively than alternative strategies.
3. What Is The Outlook For China?
We believe China is either in or sliding into a balance sheet recession, forcing Beijing to ease monetary and fiscal policy aggressively. Here are the three core factors behind this view:
- Excessive Debt: Private non-financial sector debt in China stands at 205% of GDP—similar to Japan’s overly indebted level prior to its balance sheet recession, which remains the clearest example outside of the post-GFC U.S. economy.
- Poor Capital Allocation: China’s investment-to-GDP ratio is 42%, far surpassing Japan’s peak before its real estate bubble burst. A similar bubble has plagued China for the past ~15 years.
- Shrinking Labor Force: China’s old-age dependency ratio is rising faster than in most countries, leading to two critical challenges—a shrinking labor force and an aging population.
While we remain cautious about China’s long-term outlook due to these structural issues, we do expect positive returns from Chinese assets in response to ongoing policy support. However, we do not recommend staying indefinitely long.
Instead, we advise aligning your China exposure with our Discretionary Risk Management Overlay, aka “Dr. Mo,” which pivoted clients into a max position in China on September 17th. Since then, the FXI ETF—a proxy for Chinese stocks—has rallied about 24%, even factoring in the recent pullback. At some point, Dr. Mo will instruct 42 Macro clients to book gains in China. To date, it has not yet done so.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 the 42 Macro universe.
What Happens to Markets In A Fourth Turning?
Darius recently sat down with our friend David Lin, where they discussed the drivers behind current market positioning, the Fourth Turning, its impact on asset markets, 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 Has Caused The Current Market Positioning?
In our view, current market positioning has been driven by three main themes:
- Resilient U.S. Economy: Since authoring the theme in September 2022, we have seen ongoing upside surprises in U.S. growth. We believe this resilience has contributed to the current crowded long positioning in risk assets.
- Here Comes The Liquidity: We anticipate a significant acceleration in both U.S. and global liquidity over the medium term.
- Jay Wants A Soft Landing: We have maintained this theme since last November, which revolves around the Federal Reserve’s asymmetrically dovish reaction function. When the Fed leans dovish and the economy is not in or heading into recession, it is often a bullish signal for investors.
2. How Will The Fourth Turning Affect Income Inequality?
At 42 Macro, we conducted an in-depth statistical study on Fourth Turnings, focusing on the economic implications and policy shifts, as well as their impact on asset markets.
In our empirical study, we found that income inequality, measured by the top 10% share of national income, declined sharply throughout previous Fourth Turnings.
We are currently at a very high level of income inequality, and we expect a significant decline throughout this Fourth Turning – but not without great cost. We anticipate policy trends to become increasingly populist, essentially redistributing wealth from the rich to the poor. This shift may not occur immediately, especially given the current divided government, but it may be a response to a larger crisis that both households and investors will need to navigate.
3. How Will Asset Markets Perform During The Fourth Turning?
Anticipating how asset markets will perform during the Fourth Turning involves understanding how policymakers typically respond to these geopolitical, economic, and social developments. Historically, they have used two main strategies:
- Fiscal Support: There is usually significant fiscal policy support for the economy, which boosts nominal GDP and tends to be favorable for risk assets, such as stocks, credit, crypto, and commodities.
- Monetary Debasement and Financial Repression: The Federal Reserve has historically engaged in monetary debasement and financial repression during Fourth Turnings, effectively lowering the value of money to support fiscal measures.
Combining these factors—excessive fiscal policy, monetary debasement, and currency devaluation—leads us at 42 Macro to maintain a structurally bullish stance on risk assets throughout the Fourth Turning, including stocks, credit, crypto, and commodities, while remaining structurally bearish on defensive assets like Treasury bonds and the U.S. dollar.
That does not mean that risk assets will appreciate in a straight line. There will be significant drawdowns to risk manage along the way – perhaps as painful as the Dot Com Bust, GFC, or COVID crash. Fortuitously, 42 Macro clients have access to our KISS Portfolio Construction Process and Discretionary Risk Management Overlay, aka “Dr. Mo”, to help them successfully navigate their portfolios throughout these increasingly trying geopolitical times.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 join them, we are here to support you.
When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime without penalty.
The Biggest Threat To The US Economy Today
Darius recently joined our friend Anthony Pompliano, where they discussed the impact of the recent port strike, the outlook for inflation, the national debt, 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 Impact Will The Recent Port Strike Have On The Economy?
Many of the goods entering the country pass through the ports along the Gulf Coast, East Coast, and the Port of Long Beach. We believe the recent shutdowns at these ports are likely to cause a temporary stagflationary effect.
To track the potential impact on inflation, we monitor the ISM Manufacturing and Services PMIs, which include a subindex for slower supplier delivery times. Our research shows these delivery times surged during the pandemic and after the early 2021 Biden stimulus, but have since retreated, coinciding with a decline in core inflation.
However, with the port shutdowns – now scheduled to begin on January 15th – we expect delivery times to rise again, further contributing to the stickiness in inflation we are currently observing.
2. Is 3% Inflation The New 2%?
We first published our secular inflation model at the beginning of 2022, which predicts a higher underlying trend in core PCE inflation over the next decade.
From 2010 to 2019, the 10-year run rate of core PCE inflation was 1.6%. However, our model projects a range of 2.7% to 3.1% for 2020 to 2029.
We have maintained the view that the Federal Reserve is prioritizing financial and economic stability over strict adherence to its 2% inflation target. Inflation has effectively become the Fed’s third mandate, and we believe the Fed will ultimately tolerate a higher trend inflation rate over the next decade, likely around 3%, even if they do not officially adjust their target.
3. Do Both Political Parties Contribute To The Deficit?
Our deep dive into historical economic and policy dynamics reveals that both Republicans and Democrats have contributed to the national debt.
Since the post-war era, the growth rate of the national debt under both administrations has been roughly similar:
- After one year, median cumulative debt growth is 7% under Democrat Presidents and 6% under Republican Presidents.
- After two years, it is 10% for Democrats and 12% for Republicans.
- By the third year, both are around 22%.
- By the fourth year, Republicans outpace Democrats with 39% debt growth compared to 26%.
Whether through increased fiscal spending or tax cuts that widen the deficit, our research indicates that both parties are responsible for the unchecked growth of public debt in the United States.
In short, the data run counter to emotional narratives bandied about by the media (e.g., Fox News) and increases the probability the US experiences a fiscal crisis in this Fourth Turning Regime because it lowers the probability of fiscal austerity being implemented.
That’s a wrap!
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and stress from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 join them, we are here to support you.
When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime without penalty.
Here Comes The Liquidity
Darius sat down with our friend Maria Bartiromo on Fox Business last week to discuss the probability of a soft landing, the outlook for global liquidity, China, and more.
If you missed the interview, here is the most important takeaway from the conversation that has significant implications for your portfolio:
We Believe A Soft Landing Is The Highest Probability Outcome Over The Next 12 Months
- While the stock market fundamentals might disappoint over the medium term, we believe the key driver of asset markets will be rapid liquidity growth.
- China is injecting an estimated $400 to $500 billion of liquidity over the next 6 to 12 months. Additionally, we expect around $700 billion in TGA spend-down during the first three to four months when the debt ceiling moratorium ends early next year. This anticipated surge in liquidity is not a force you want to bet against as an investor. If you are bearish, we suggest holding off on that view and revisiting it in Q2 of next year.
- Credit debt is currently an issue, especially for small businesses and low-income consumers. However, the U.S. economy is a very K-shaped, top-heavy economy. If financial conditions remain easy, we believe wealthy consumers will continue spending.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 join them, we are here to support you.
When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime without penalty.
The Fed Is Easing Into A Major Regime Shift
Darius recently sat down with our friend Felix Jauvin from Blockworks, where they discussed the Fed, the bond market, a positive inflection in the fiscal impulse, 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. Is The Fed Cutting Rates to Ease or Normalize?
When the Fed cuts rates, it is important to distinguish between policy normalization and easing. Outright easing refers to the Fed lowering the policy rate below neutral to stimulate the real economy.
Normalization, however, aims to bring the policy rate to a neutral level without additional stimulus. We believe the Fed is cutting rates to normalize policy rather than stimulate the economy.
Taking a step back, the Fed is lowering the policy rate during a business cycle expansion, with growth already likely to exceed expectations according to our GRID Model projections. Altogether, this creates a generally supportive environment for asset markets.
2. Is the Bond Market Pricing In A Recession?
When examining the neutral policy rate in U.S. dollar money markets, we find that they are only pricing in about half of a recession.
Historically, on a median basis, during postwar U.S. recessions, the Fed has lowered the policy rate by around 400 basis points. In recessions caused by overly restrictive monetary policy, the Fed has lowered the policy rate by a median of 475 basis points.
With roughly 250 basis points of rate cuts currently priced in, this reflects only 50-55% of a typical recession. We disagree that the bond market is fully pricing in a recession. Instead, we believe the market is pricing in a bimodal distribution: one scenario of a soft landing (which we currently are in the camp of) and the other of a potential recession.
3. How Has The Fiscal Impulse Changed In Recent Months?
At 42 Macro, we track US Treasury Federal Budget Net Receipts, Net Outlays, and the Budget Balance on a fiscal year-to-date, year-over-year percentage change basis.
When observing the data, we find the fiscal impulse has been modestly negative since early 2024. Through July, the budget deficit was down 6% on a fiscal year-to-date, year-over-year percentage change basis. However, with the data through August, the budget deficit has risen by 24%. This marks a significant inflection from a negative fiscal impulse to a positive one.
This dynamic will likely contribute to our GRID Model projections for Nominal GDP to surprise to the upside in the US economy over the medium term. That dynamic favors overweighting risk assets like stocks, credit, crypto, and commodities and underweighting defensive assets like bonds and the US dollar.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 join them, we are here to support you.
When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime without penalty.
What Will The Future of AI Hold?
Darius recently hosted our friend Beth Kindig on 42 Macro’s Pro to Pro, where they discussed the outlook for the Tech and Communication sectors, how companies will benefit from AI, the scale of AI as an investment opportunity, 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. Are The Tech and Communication Services Sectors Overvalued?
Our research shows that the valuations of the Tech and Communication Services sectors, when combined, are comparable to levels seen during the dot-com bubble.
At 42 Macro, we monitor metrics such as the trailing 12-month price-to-earnings (P/E) ratio, price-to-sales ratio, and the combined market cap of these sectors as a share of total S&P 500 market cap.
While the current earnings and cash flow generation of these companies make a return to the extreme P/E levels of the dot-com bubble unlikely in the medium term, we have already exceeded the peak price-to-sales ratio and their share of the overall S&P 500 index from that period. This suggests that while earnings may provide some cushion, valuation pressures remain elevated compared to historical benchmarks.
2. How Will Firms Become More Profitable Through The Implementation of AI?
Estimates from McKinsey and Gartner indicate that AI will generate $4.4 trillion in global profits. But where will these profits come from?
One example, highlighted by Beth Kindig, is Klarna, the buy-now-pay-later unicorn valued at around $7 billion. Klarna recently announced plans to eliminate Salesforce and Workday from their tech stack by developing custom large language models tailored to their needs.
Beth estimates the custom models might cost them between $3 to $7 million, compared to the tens of millions they would spend on Salesforce and Workday subscriptions. By integrating custom AI solutions and cutting out those expensive software products, Klarna will likely become more profitable.
3. Is AI A Better Investment Opportunity Than The Internet?
The internet is open-source and highly democratized, allowing anyone to create a website easily.
AI, however, is the opposite. It is proprietary, with companies owning their large language models. The barrier to entry for AI is extremely high, unlike the internet, where it is nearly nonexistent.
Training an LLM is costly, and the scarcity of GPUs makes success in AI challenging. This creates a winner-takes-all environment where early movers gain a significant competitive edge. Investing in AI today presents a rare opportunity to benefit from a high-barrier-to-entry industry with massive growth potential and the power to shape entire sectors for years to come.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 join them, we are here to support you.
When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime without penalty.
Threading The Macro Needle
Darius recently joined our friends Nadine Terman and Ben Brey, where they discussed the Market Regime outlook, our “Resilient US Economy” theme, #inflation, 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. Is A Transition to A Risk-Off Market Regime Likely Over The Medium Term?
A transition to a risk-off Market Regime is typically caused by one or more of three factors:
- A sharp, unexpected, and prolonged deceleration in growth
- A sharp, unexpected, and prolonged acceleration in inflation
- A sharp and unexpected tightening of monetary and/or fiscal policy – usually both
In terms of our fundamental outlook, we do not believe any of these scenarios is highly probable in the medium term.
As a result, we believe the path of least resistance in risk assets is likely to remain higher until one or more of these factors comes to fruition.
2. What Is Upholding Our “Resilient US Economy” Theme?
We expect growth to remain resilient and surprise consensus expectations to the upside.
There are five pillars upholding that view:
- A historically strong household sector balance sheet
- The “West Village Montauk Effect”
- A historically strong corporate sector balance sheet
- Limited exposure to the policy rate
- Limited exposure to the manufacturing sector
Additionally, there is little evidence of capital misallocation or adverse selection in the current business cycle. Specifically, the U.S. private non-financial sector’s debt-to-GDP ratio has been declining during this business cycle, indicating that economic growth is outpacing credit expansion.
3. What Is The Outlook For Inflation Over The Medium Term?
Our models indicate inflation is likely to bottom in 2H24.
However, as we head into Q1 of 2025 and beyond, our models diverge from consensus estimates and suggest inflation is likely to reaccelerate from the cyclical low observed in 2H24.
We believe there are three major factors that are likely to cause inflation to reaccelerate:
- Easing base effects;
- Inflation is the most lagging indicator of the business cycle and we do not anticipate a recession over a medium-term time horizon; and
- Incrementally populist fiscal policy.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 join them, we are here to support you.
When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime without penalty.
Why The Fed Needs To Front Load Rate Cuts
Darius recently joined our friend Charles Payne on Fox Business, where they discussed the outlook for the US economy, the impact of rate cuts, the significance of the Dollar, 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 The Medium Term Outlook On The Economy?
While the slowing economy might seem concerning after a significant market rally, we believe growth is likely to surprise to the upside over the medium term.
Generally speaking, the preponderance of evidence points to an economy that is moderating and a labor market that is cooling but not collapsing.
When observing the leading indicators of the broader business cycle, we believe they do not suggest investors should expect a recession over the medium term, which is positive for asset markets.
2. How Would A 50 Basis Points Cut Affect The Global Economy?
The U.S. Net International Investment Deficit doubled in the five years through 2023, increasing from $10 trillion in Foreign-Owned U.S. Assets to $20 trillion. This means a large amount of unrealized capital gains may flow out of the U.S. if the Fed is not careful managing the pace of the dollar’s decline.
A 50 basis point cut next week would likely send a signal to international capital allocators that something might be wrong with the U.S. economy, causing them to book gains and return home with their capital.
In our view, we would not suggest starting with a 50 basis point cut. However, if data from the labor market and inflation support it, the Fed should accelerate the pace of easing between now and the end of March. Beyond that, their window to continue easing may close for a while due to accelerating inflation.
3. How Will The DXY Impact Asset Markets Over The Next 12 Months?
The dollar is typically the most dominant factor in driving the global economy and global liquidity.
We believe the dollar is poised to decline significantly over the next 12 months, which should provide a positive boost to global growth.
However, investors should remain cautious and continue favoring defensive sectors and factors within the equity and fixed income markets because this could also trigger the unwinding of popular trades, including the Yen carry trade.
By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve.
This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.
If you don’t change your process, how can you expect to get better results?
Over 2,000 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 join them, we are here to support you.
When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime without penalty.