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.

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

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

Best of luck out there,

— Team 42

The Five-Year Countdown: How AI Will Dramatically Reshape The Economy And Asset Markets

Darius recently sat down with Raoul Pal of Real Vision for an enlightening conversation about the accelerating impact of AI, the exponential age, and what investors must do now to stay ahead. If you missed it, here are the three most important takeaways that could significantly impact your portfolio:

1) The Next Five Years Will Change Everything—Faster Than Expected

Raoul Pal’s “Exponential Age” thesis is happening at an even greater speed than anticipated. With AI advancing at an exponential rate—expected to surpass human intelligence within the next year—the way we work, invest, and interact with markets will fundamentally shift. AI will replace entire job sectors, disrupt business models, and introduce extreme efficiency into capital formation. Investors need to understand that the old rules of economic cycles and the age-old labor vs. capital debate are being rewritten in real-time.

Key Takeaway:

The next five years are crucial—investors who don’t adapt will be left behind. This is the window to build financial security and position portfolios for the seismic shifts ahead.

2) AI and Automation Will Reshape Market Structure

Financial markets will undergo a transformation as AI-powered investment strategies begin to dominate. The firms with the most advanced AI will gain an enormous edge, potentially absorbing vast amounts of market share and capital. At the same time, markets will become both hyper-efficient over the short-to-medium term and hyper-inefficient over the long-term—creating opportunities for those who can navigate the chaos.

Key Takeaway:

The traditional diversification approach (e.g., 60/40 portfolios) will likely underperform. Instead, investors should focus on secular trends such as AI, blockchain, and exponential technologies—these will be the defining investment themes of the coming decade.

3) The Key Risk Is Not Being Over or Under Invested—It’s Being In The Wrong Assets

One of the biggest mistakes investors make is under-allocating to exponential assets. Traditional portfolio management focuses on diversification across asset classes, sectors, and factors, but in this new era, the most successful investors will be those who hyper-concentrate in the right areas. Crypto, AI-focused equities, and cutting-edge technology plays offer the best asymmetric upside.

Key Takeaway:

Investors need to be positioned in exponential assets. Staying on the right side of market risk during the “exponential age” increasingly requires a risk management framework that adapts to rapid change, like our KISS Portfolio Construction Process and Dr. Mo (Discretionary Risk Management Overlay). The size, scope, and rapid pace of change in the economy and asset markets means investors relying on legacy frameworks will struggle—especially as the share of trading activity generated by AI accelerates. Trend following is the best solution to ensure you are participating alongside the supercomputers, not fighting them.

Final Thought: The Time to Act Is Now

If you believe the world will look drastically different in five years, your portfolio should reflect that. The biggest macro opportunity in history is unfolding—don’t get left behind.

Since our bullish pivot in January 2023, the QQQs have surged 86% and Bitcoin is up +316%.

If you have missed part—or all—of this market, 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.

Thousands of investors around the world use 42 Macro to confidently navigate market shifts and optimize their portfolios. If you’re ready to incorporate macro into your investment process and stay ahead of these monumental changes, we invite you to watch our complimentary 3-part Macro Masterclass.

The Macro Class

No catch—just real insights to help you stay ahead in the #Team42 community.
Best of luck out there,

— Team 42

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%.

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.

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.

Financial Repression Survival Tactics

Darius recently sat down with Exploring Prosperity’s Robert Dewey, where they discussed the new wave of populism, the impacts of the U.S. regional banking crisis, the U.S. 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. Is There A Material Difference Between Either Presidential Candidate From A Fiscal Policy Perspective?

Regardless of which candidate wins the upcoming election, we believe we are likely to see even more populism, or the promotion of policies that reflect the concerns of the people, regardless of the economic or institutional impact those policies have.

No matter what form this new wave of populism takes, it is likely to drive US public sector debt growth that forces the Fed to remain asymmetrically dovish.

Our view is that we are all frogs being slowly boiled alive in a pot of monetary debasement and financial repression, driven by Fourth Turning-style fiscal dominance. We have called for continued financial repression, which we have already experienced—and in our view, it is likely to accelerate throughout this Fourth Turning.

2. How Has The Focus of Policymakers Shifted Since The U.S. Regional Banking Crisis?

During the U.S. regional banking crisis in March 2023, the forward rate curve inverted and has remained persistently negative ever since.

This deepening inversion signaled to investors that financial stability concerns had taken precedence—reflecting Fourth Turning-style financial repression, in which stabilizing sovereign debt markets is the central focus for policymakers.

The persistent inversion has profoundly impacted the Fed’s balance sheet and overall U.S. liquidity. As the Fed responded with dovish measures during the crisis, trillions of dollars flowed out of the reverse repo (RRP) facility and into financial markets. In our view, this liquidity flow remains ongoing and is likely to extend into Q1 2025.

3. How Will Global Reliance on The US Dollar Change Over The Next Decade?

Our research indicates the U.S. dollar currently plays a dominant role in the global financial system:

50% of currencies with pegs are anchored to the dollar (by GDP).
60% of global FX reserves are held in dollars.
60% of cross-border bank lending is conducted in dollars.
70% of international debt securities are dollar-denominated.
79% of global trade is invoiced in dollars.
88% of foreign exchange transactions involve the dollar.
99% of stablecoin reserves are backed by the dollar.

In our view, these numbers will decline over the long term as countries reduce their reliance on the dollar. We believe the continuation of aggressive populist fiscal policies in the U.S. poses significant risks for investors, with the most important risk being how the Federal Reserve responds to the global shift away from the dollar, as this transition will have profound implications for financial markets. We think the Fed will print money to monetize US deficits, filling the increasing void left behind by international investors and central banks.

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.

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.

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.

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.

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.

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.

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.