Can Risk Assets Achieve Escape Velocity Without Quantitative Easing?

Darius Dale recently joined Charles Payne on Fox Business to tackle one of the most pressing macro questions of the moment: Can risk assets achieve escape velocity without quantitative easing? If you missed the segment, here are three key takeaways that likely have huge implications for your portfolio:

1) W-Shaped Market in a U-Shaped Economy

Darius emphasized that the market may be tracing out a W-shaped pattern—meaning investors should expect another leg down before a sustained rally. With the economy facing tough comps, fading fiscal support, and an ongoing tariff shock, consensus GDP and earnings estimates are likely too high and need to be revised lower. Investors should be patient and prepared to deploy capital when the market looks most vulnerable.

Key Takeaway: Don’t chase perceived bottoms. The next major buying opportunity may come after a retest aligns expectations with reality.

2) Hard Data Still Has to Catch Down to Soft Data

Soft data has already collapsed, but hard data remains relatively resilient. Dale warned that incoming quarters—particularly Q2 and Q3—are likely to show economic deterioration as lagging indicators finally roll over. The full impact of restrictive immigration, tariffs, and fiscal retrenchment is still working its way through the system.

Key Takeaway: The real slowdown is still ahead. Expect economic headlines to worsen before they improve, even if markets temporarily rally.

3) No QE… Yet. QE Is Coming If Trump Doubles Down

Whether QE is necessary depends on whether President Trump continues retreating from “Paradigm B” or doubles down on economic disruption. If he doubles down on hardcore tariff policy, the bond market will react poorly, and the Fed may be forced to re-engage liquidity support. Until then, liquidity is still abundant in the private sector—but that support is not infinite.

Key Takeaway: Fed action is not inevitable, but policy uncertainty leaves the door open.

Final Thought: Intent And Execution

Markets are entering a critical phase. As Darius outlines, the path forward hinges not just on macro fundamentals but on political intent and policy execution. Whether risk assets can achieve escape velocity without QE will depend on discipline from policymakers.

If you are not confident your portfolio is positioned correctly for the evolving macro landscape, partner with 42 Macro for data-driven insights and proven risk management overlays—KISS and Dr. Mo—to help you stay on the right side of market risk.

THE MACRO CLASS

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Best of luck out there,

— Team 42

How Liberation Day Changed Everything

Darius Dale recently joined Jesse Day on Commodity Culture to explain why Liberation Day marks the most transformational economic event since Lehman Bros. went bankrupt in 2008. If you missed the conversation, here are three key takeaways that likely have huge implications for your portfolio:

1) The Trump Put Is Active—But at a Cost

Darius explains that recent Treasury and currency market moves resembled an emerging-market style capital flight — a clear break from historical norms. With global investors selling U.S. assets, the Trump administration was forced to activate a “Trump Put” and slow its economic reorganization strategy.

Key Takeaway:
The U.S. faces a capital war, not just a trade war — reshaping global capital flows and weakening U.S. financial dominance.

2) Gold Is Replacing Treasuries as a Defensive Anchor

Seeing growing fragilities, Darius repositioned 42 Macro’s systematic KISS portfolio out of Treasuries and into gold last October. Gold is rapidly gaining ground as a reserve asset for central banks, signaling a structural shift in safe-haven demand as trust in U.S. debt erodes.

Key Takeaway:
Gold is emerging as the new store of value in a world that is becoming less inclined to capitalize U.S. fiscal and monetary largesse.

3) The Fourth Turning is Accelerating

Today’s macro landscape fits the classic Fourth Turning pattern: rising deficits, sticky inflation, declining globalization, and surging volatility. Markets are still set for big rallies — but also sharper drawdowns amid historically elevated economic, policy, and geopolitical uncertainty.

Key Takeaway:
Investors must prepare for bigger swings, persistent inflation, and an unwinding of American financial exceptionalism.

Final Thought: Crossing the Threshold

Markets have crossed a major threshold. As Darius highlights, Liberation Day revealed the cracks in U.S. financial leadership and accelerated the global pivot to alternative stores of value. Navigating the Fourth Turning will demand more than conviction — it will require a disciplined, adaptive strategy.

THE MACRO CLASS

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Best of luck out there,

— Team 42

Capital At A Crossroads

Darius Dale recently joined Julia La Roche for a timely conversation unpacking the Trump administration’s pro-Wall Street-pivot, growing fragility in U.S. capital markets, and how investors should think about positioning in a Fourth Turning world. If you missed the conversation , here are three key takeaways that likely have huge implications for your portfolio:

1) The Trump Put Is Active—But at a Cost

Trump’s softened stance on tariffs and Powell confirms the bond market—not the stock market—forced a pivot. The administration appears to be shifting from Main Street-focused reform—aka “Paradigm B”—to Paradigm C: deregulation, debt-financed tax cuts, and continued fiscal largesse.

Key Takeaway:
Markets are celebrating the pivot, but it suggests a renewed dependence on policy largesse that is largely favorable for Wall Street rather than structural change that is largely favorable for Main Street.

2) Foreign Capital Is Watching Closely

With over 30% of Treasuries held by foreign investors and a $24T net international investment deficit, the U.S. is as vulnerable to capital outflows as any major economy in modern world history. Treasury market dislocations and growing capital outflows resemble emerging-market-style stress. Maintaining investor confidence is becoming more urgent.

Key Takeaway:
The Fed may ultimately need to step in with yield curve control or large-scale asset purchases if foreign demand continues to wane.

3) A New Phase of the Fourth Turning Is Here

Darius notes that generational fatigue with legacy leadership is accelerating, especially in light of perceived policy failures across multiple administrations. The Fourth Turning dynamic is sharpening, with increasing political, economic, and social volatility.

Key Takeaway:
Investors should expect greater uncertainty—but also opportunity—as long-term realignments continue to manifest.

Final Thought: Stay Systematic

Darius sees markets at a critical juncture, where capital outflows, geopolitical fractures, and generational turnover are reshaping macro risk. As he emphasized, understanding the erosion of U.S. fiscal privilege and the deeper forces of the Fourth Turning is foundational. The next repricing won’t just be about growth or inflation—it will reflect how capital responds to a system under stress. Stay vigilant, stay systematic.

THE MACRO CLASS

No catch—just real insights to help you stay ahead in the #Team42 community.

Best of luck out there,

— Team 42

The Mechanics of Markets—Darius Dale & David Levenson on Pro to Pro

Darius Dale recently sat down with David Levenson to unpack what David believes are the hidden mechanics of markets, mortgage duration dynamics, and the liquidity fragilities shaping the next regime shift. If you missed the conversation, here are three key takeaways that likely have huge implications for your portfolio:

1) Mortgage Volatility Is the Acorn of the Entire Financial System

David argues that global asset markets are governed not just by central bank policy but by the reflexive interaction between mortgage and equity volatility. When mortgage rates fall, the average duration of mortgage-backed securities collapses—forcing institutions to unwind hedges and buy longer-duration Treasuries to rebalance their books. This “duration drain” fuels powerful bond rallies and asset repricing across markets.

Key Takeaway:
Mortgage convexity is the hidden driver of global liquidity cycles. As mortgage rates fall and durations shorten, expect a short squeeze in the Treasury bond equivalents used to hedge the banks’ mortgage books.

2) Policy Interference Is Artificially Propping Up Markets

Levenson emphasized that the Federal Reserve’s rate cuts, QT tapering, and yield curve engineering are emergency responses to rapidly deteriorating monetary transmission. Unlike Greenspan—who let the Nasdaq fall 57% before easing—Powell is emptying his toolkit preemptively, manipulating rates and the curve to hold up equity valuations. But the system is leaking, and compiled policy interference (CPI) is nearing exhaustion.

Key Takeaway:
Markets are no longer moving freely—they’re being duct-taped by a Fed losing control. When the final pump jack fails, expect an accelerated repricing of overvalued growth stocks and a shift toward hard asset defensives.

3) The Next Regime Will Be Driven by Mortgage Reflation

With $35 trillion in U.S. home equity and a structurally evolved mortgage origination model, Levenson believes housing is set to reflate aggressively—even into economic slowdown. Independent mortgage lenders, AI-enabled servicing, and low-friction securitization mean housing credit can expand without bank balance sheet constraints. As Powell cuts, mortgage demand will spike and M2 money supply could implode.

Key Takeaway:
Forget traditional recession playbooks. The mortgage market is structurally capable of driving reflation without Fed help. Investors should prepare for an economic regime shift led by housing and mortgage credit, not corporate earnings.

Final Thought: Signals Beneath The Noise

David Levinson sees markets at a critical inflection point, where traditional macro playbooks may fail to capture the reflexive, volatility-driven forces shaping the next regime. As he highlighted, understanding the structural mechanics of mortgage markets, policy distortions, and liquidity flows is essential—not optional—for investors aiming to stay ahead. The next big move won’t just be about inflation or growth—it’ll be about how the plumbing of the system reacts when the pressure builds. Stay vigilant, stay systematic.

THE MACRO CLASS

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Best of luck out there,

— Team 42

The Paradigm Is Shifting — Are You Positioned for It?

Darius Dale recently joined Felix Jauvin on Forward Guidance to break down why the U.S. economy is undergoing a historic paradigm shift—from Wall Street-led globalization to Main Street-driven reindustrialization. If you missed the interview, here are three key takeaways that likely have huge implications for your portfolio:

1) Tariffs Mark the Beginning of a Multi-Year Economic Regime Shift

Darius explains that the Trump administration’s tariffs are not a short-term negotiating ploy, but the cornerstone of a deliberate shift from a K-shaped, globalized economy (“Paradigm A”) to an E-shaped, reindustrialized economy (“Paradigm B”). This transition, inspired by Fourth Turning dynamics, is designed to compress the gap between capital and labor-even if it means short-term economic pain.

Key Takeaway:
Markets are still mispricing the durability and intent behind these policies. Investors expecting a quick policy reversal or return to the status quo risk being caught on the wrong side of a structural transition that favors domestic labor and reindustrialization over corporate profit margins.

2) A Technical Recession Is Likely—But an Actual Recession Isn’t Guaranteed (Yet)

Despite rising fears, Darius argues that the U.S. is more likely headed for a technical recession (two or more quarters of negative growth) rather than an NBER-defined, broad-based recession—at least for now. Strong private sector balance sheets, labor hoarding, and a healthy base rate for corporate profitability suggest the downturn could be shallow initially.

Key Takeaway:
While risk assets may still fall over the next ~two quarters, the likelihood of a full-blown financial crisis is much lower than in past cycles. But should the transition falter or policy missteps compound, downside risk could still reach -30% to -40% on the S&P 500.

3) Only QE and Fiscal Stimulus Can Smooth This Transition

Darius emphasizes that cutting interest rates alone won’t be enough. The Fed must resume some form of quantitative easing (QE) to offset the current global debt refinancing air pocket, rising yields, and negative fiscal shocks from both tariffs and DOGE spending cuts. The now-House-approved-Senate tax cut plan could help, but execution risk remains given the deficit hawks, high-Medicaid-state-Senators, and “SALTY” Republicans in Congress.

Key Takeaway:
Without QE or meaningful fiscal relief, the economy could suffer prolonged stagnation. Investors must be prepared for a bumpy ride, with significant downside if the Fed and Congress fail to act boldly. Persistent above-target inflation mean the Fed may be too slow to respond.

Final Thought: Positioning for the Paradigm Shift

Markets are still adjusting to the scale and seriousness of the paradigm shift underway. What many dismissed as mere political posturing is now revealing itself as a structural realignment—one that challenges decades of globalization, reshapes corporate profit dynamics, and forces both investors and policymakers to reconsider their playbooks. Whether or not you agree with the direction, the implications are undeniable: positioning for the durability of this transition will be the key differentiator in portfolio performance and resilience.

THE MACRO CLASS

No catch—just real insights to help you stay ahead in the #Team42 community.

Best of luck out there,

— Team 42

The End of American Exceptionalism?

Darius Dale recently joined Víctor Hugo Rodríguez on Negocios Televisión to discuss why markets may not have bottomed yet—and what needs to change before risk assets become attractive again. If you missed the appearance, here are three key takeaways that likely have huge implications for your portfolio.

1) Markets Won’t Bottom Until Three Things Happen

Darius laid out a clear three-point checklist that must be met before investors can confidently reallocate into risk assets:

The Fed must expand its balance sheet (i.e., QE or liquidity support).
Consensus earnings and GDP estimates must be revised lower to reflect recession risks.
Clarity is needed on fiscal policy—specifically, whether Trump’s tax cut package will actually be stimulative and whether the “DOGE” budget cuts will be softened.

Key Takeaway:
We’re still early in all three of these processes, meaning downside risk remains elevated over the next 2-3 quarters. Investors should expect more volatility until policymakers act decisively.

2) Foreign Demand for U.S. Assets Is Cracking

Darius warned that global capital allocators may be stepping back from U.S. Treasuries and equities. As the U.S. turns away from globalization and fiscal prudence, foreign investors are less willing to finance America’s growing deficits. With Congress potentially adding another $5-plus trillion in debt via tax cuts, this shift could put significant upward pressure on long-term yields.

Key Takeaway:
This marks the potential beginning of a structural regime shift in global capital flows—a bearish signal for bonds and a growing risk to U.S. financial stability.

3) The KISS Portfolio Is Positioned for Defense

Months ago, Darius moved his own allocation—and that of thousands of 42 Macro clients—into defensive posture. At the time of recording on Tuesday afternoon, the 42 Macro KISS portfolio featured:

67.5% Cash
0% Stocks
30% Gold
2.5% Bitcoin

Key Takeaway:
KISS pivoted to 0% equities on March 5th, and will remain in defensive mode until it quantitatively derived volatility targeting and dynamic position sizing signals inflect. The strategy is designed to minimize drawdowns and preserve capital during cyclical bear markets—while also participating in bull markets.

Final Thought: Wait for the Signal, Not the Noise

Markets are still searching for footing in a rapidly shifting macro landscape. As Darius makes clear, this isn’t a moment for hero trades or blind optimism — it’s a moment for discipline. Until we see a dovish policy pivot, meaningful earnings downgrades, and/or clarity on fiscal direction, staying defensive isn’t just smart — it’s necessary. Risk-on will have its time, but we’re not there yet. Let the checklist, not emotions, guide you.

No catch—just real insights to help you stay ahead in the #Team42 community.

Best of luck out there,

— Team 42

Tariffs: The Ultimate Stagflationary Shock?

Darius Dale recently joined Jack Farley on The Monetary Matters Network to break down why we remain bearish on U.S. equities, cautious on bonds, and are eyeing a short-term bid in Treasurys. If you missed the interview, here are three key takeaways that likely have huge implications for your portfolio:

1) The U.S. Economy Faces a Slower Growth and Higher Inflation Environment

Darius emphasized that tariffs, policy uncertainty, DOGE, and restricting immigration are creating a stagflationary shock. This is pushing growth expectations lower while raising inflation risks. The Trump administration’s economic restructuring plan aims to shift the economy away from deficit-financed consumer spending toward a more balanced, private sector-driven model—but that transition is likely to be turbulent.

Key Takeaway:
Markets may still be underpricing the magnitude of the economic slowdown. A period of slower growth, rising unemployment, and compressed corporate margins could drive a significant repricing of risk assets from here.

2) A Global Debt Refinancing Crunch Remains the Top Risk of 2025

Darius flagged what he calls a “global debt refinancing air pocket” as the number one risk for investors this year. While debt refinancing needs are surging due to the all-time-low-interest-rate borrowing from 2020 rolling over, global liquidity is not keeping pace. This creates a dangerous imbalance that historically leads to severe dislocations in asset markets. Global debt refinancing risk is being exacerbated by the risks we flagged in callout #1 above.

Key Takeaway:
Unless the Federal Reserve intervenes with QE before a crisis hits, financial instability—especially in credit markets—may force a much sharper correction than consensus expects. The Fed’s delayed reaction function adds to the downside risk.

3) Asset Allocation Must Reflect a Wide Distribution of Probable Economic and Policy Outcomes

Darius highlighted that 2025 presents one of the widest distributions of macroeconomic outcomes he’s seen in his career. With meaningful downside risks in the near term, followed by potential tailwinds (tax cuts, deregulation, QE), investors must be prepared for both a deepening crash and a rapid recovery over the next few quarters.

Key Takeaway:
Sticking with a static portfolio strategy may expose investors to unnecessary drawdowns. Systematic risk-managed approaches, like KISS, that dynamically adjust based on volatility and macro signals could be essential in navigating this highly uncertain environment.

Final Thought: Prepare to Risk Manage a Deep “V”

Markets are entering a treacherous phase—caught between slowing growth, rising inflation, and record levels of debt that need refinancing. With tariffs and fiscal retrenchment amplifying downside risks, the Fed may be forced to choose between maintaining inflation credibility or delivering preemptive liquidity support. Meanwhile, the global capital cycle is turning, and U.S. exceptionalism is starting to fray. Investors must recognize that the range of outcomes in 2025 is unusually wide—and incorporating signals from proven risk management overlays is more critical than ever.

No catch—just real insights to help you stay ahead in the #Team42 community.

Best of luck out there,

— Team 42

Is President Trump Engineering A Hard Reset?—Darius Dale on Negocios TV

Darius Dale recently sat down with Víctor Hugo Rodríguez to break down the impact of fiscal tightening, global debt refinancing risks, and the Federal Reserve’s next move. If you missed the interview, here are three key takeaways that may have huge implications for your portfolio:

1) The U.S. Economy Is Slowing Faster Than Expected

Darius warns that the U.S. economy is decelerating more quickly than consensus expects, as both fiscal tightening and policy uncertainty weigh on growth. The economy had been artificially boosted by government spending, but that effect is now wearing off. Meanwhile, the federal deficit has surged by 38% this fiscal year and by nearly 30% on a calendar-year basis, increasing the risk of a faster-than-expected slowdown from this artificial sugar high.

Key Takeaway:
Without policy intervention, the risk of a full blown crash in the stock market is rising. The Fed’s response will be crucial in determining whether the market can stabilize. We do not currently anticipate the Fed will be proactive enough.

2) The Global Debt Refinancing Crunch Could Trigger Forced Deleveraging

Roughly 20-25% of global non-financial sector debt must be refinanced in 2025, creating a massive liquidity gap. The key question: Who will absorb this debt? With investor balance sheets stretched and the Fed unlikely to launch QE soon, liquidity shortages could force asset sales and amplify volatility.

Key Takeaway:
Investors should watch credit markets closely—signs of stress here could signal broader market fragility and a sharp repricing of risk assets.

3) Defensive Positioning Is Critical in a Liquidity Vacuum

Darius argues that investor expectations remain too optimistic, despite sizable downside risks to growth. In this environment, capital preservation should take priority. Defensive positioning includes raising cash, rotating up in credit quality, and shifting toward defensive equities like consumer staples and utilities.

Key Takeaway:
The safest sectors in this environment are defensive dividend stocks like utilities and consumer staples, while high-beta cyclical assets tied to trade remain vulnerable.

Final Thought: The Fed’s Dilemma Will Define 2025

The Fed faces a tough choice: stick to its 2% inflation target or intervene with liquidity support to stabilize markets. If inflation reaccelerates while growth slows, the Fed may need to revise its inflation target higher to justify adequate monetary easing. The macro landscape is shifting fast—investors must stay ahead of these critical developments.

THE MACRO CLASS

No catch—just real insights to help you stay ahead in the #Team42 community.

Best of luck out there,

— Team 42

Tracking The Invisible Gorilla—Darius Dale & Hugh Hendry on Pro to Pro

Darius Dale, 42 Macro Founder and CEO, sat down with legendary macro investor Hugh Hendry to dissect the Eurodollar system, the Yen carry trade, and the potential for a global liquidity squeeze. If you missed the interview, here are three key takeaways that may have huge implications for your portfolio:

1) The Eurodollar System Fuels the Overvaluation of Everything

Hugh argues that global liquidity isn’t controlled by central banks but rather by the Eurodollar system—an unregulated, highly leveraged financial network that drives global credit expansion. For decades, foreign banks have used U.S. Treasuries, JGBs, and European bonds as collateral to create vast amounts of off-balance-sheet credit, inflating asset prices worldwide. However, as cracks emerge in global markets, liquidity may be tightening faster than investors realize.

Key Takeaway:
The Eurodollar system, not the Fed, dictates market liquidity—watch for signs of stress that could trigger a sharp repricing of risk assets.

2) The Yen Carry Trade Is Unwinding, and It’s Not Over

The Japanese banking system has been a major source of global liquidity, using JGBs to access dollars via Eurodollar swaps. But BOJ tightening amid a U.S. growth scare risks triggering a broader unwind of global risk-taking.

Key Takeaway:
A deepening US growth scare would be a major macro shock, potentially triggering forced deleveraging across global markets.

3) Trump’s Policies Could Engineer a Deep Recession—By Design

Hugh suggests Trump may be embracing a Paul Volcker-style economic shock by deliberately pushing for austerity, tariffs, and aggressive spending cuts. The goal? Trigger short-term pain to force a hard economic reset. Meanwhile, the Fed’s recent rate cuts weren’t about supporting the economy—they were about steepening the yield curve to prevent a flood of mortgage refinancing that could have reignited inflation.

Key Takeaway:
Markets should prepare for policy-driven volatility, as accelerated fiscal tightening collides with delayed monetary easing.

Final Thought: The Death of Money?

We may be witnessing a paradigm shift in global finance. The pillars that have supported market liquidity for decades—the Eurodollar system, Japan’s banking sector, and China’s dollar recycling—are all under pressure. If these liquidity engines unwind, we could see a prolonged bear market and a potential hard reset of the global financial system. The macro landscape is shifting fast—investors must stay ahead of these critical developments.

THE MACRO CLASS

No catch—just real insights to help you stay ahead in the #Team42 community.

Best of luck out there,

— Team 42

Is Trump Crashing The Market On Purpose?

Is Trump Crashing The Market On Purpose?

Darius Dale, 42 Macro Founder & CEO, joined Anthony Pompliano on The Pomp Podcast to break down the potential market impact of Trump’s economic policies, the Fed’s inflation dilemma, and why the government might be engineering short-term pain for long-term gain. If you missed the podcast, here are three key takeaways that may have huge implications for your portfolio:

1) Is Trump “Kitchen-Sinking” the Economy to Rebuild It?

Darius likens Trump’s approach to President Reagan’s 1980s strategy—short-term pain to reset the system. By implementing tariffs, restricting immigration, and perpetuating maximum uncertainty among investors, consumers, and businesses, the administration appears to be forcing a hard reset toward a supply-side economy. While the long-term goal may be economic expansion, markets are reacting to the immediate downside risks, as uncertainty weighs on growth and sentiment relative to elevated expectations.
Key Takeaway:
While short-term pain may lead to long-term gains, the adverse sequence of policy implementation should not be ignored.

2) Policy Uncertainty Is Freezing Consumer & Business Confidence

Consumer spending has slowed despite rising disposable income, as people increase savings due to economic uncertainty. Businesses are also holding back on investment, with Q4 real business investment contracting over 3%. This hesitation is already showing up in slowing growth data, and if uncertainty lingers, it could push the U.S. into a deeper slowdown than previously expected.

Key Takeaway:
Without clarity on fiscal policy—especially tax cuts and deregulation—the economy and asset markets may struggle to sustain upside momentum.

3) Will the Fed Quietly Raise Its Inflation Target Again?

Darius’ secular inflation model suggests the U.S. equilibrium Core PCE inflation rate has shifted to 2.7-3.3%, making the Fed’s 2.0% target increasingly unrealistic.If growth continues to slow and inflation trends higher in 2025, the Fed will be forced to either tighten policy, risking recession, or revise its target higher to provide more flexibility for market support.
Key Takeaway:
A shift in the Fed’s stance on inflation could be one of the biggest market catalysts of the year, dictating liquidity trends and risk appetite. We expect the FED to cave and provide liquidity, but it may not do so proactively—risking a potential crash.

Final Thought: Navigating an Era of Economic Reset

Markets are in a tug-of-war between short-term economic uncertainty and long-term economic prosperity. A successful shift to a supply-side economy could sustain the economic expansion, but near-term turbulence may be unavoidable. Liquidity trends and Fed policy will determine whether this reset builds strength or triggers deeper downturns. Investors must stay agile and ahead of macro shifts.

THE MACRO CLASS

No catch—just real insights to help you stay ahead in the #Team42 community.

Best of luck out there,

— Team 42