Darius Dale, Founder & CEO of 42 Macro, recently joined Nicole Petallides on Schwab Network to break down market volatility, the resilience of the U.S. economy, and how investors should be thinking about liquidity, policy uncertainty, and positioning. In case you missed the appearance, here are three key takeaways that could shape your portfolio strategy:
1) Liquidity is Likely To Rescue Markets
Despite concerns over short-term volatility, Darius sees a general uptrend in asset markets driven by accelerating liquidity—both globally and within the U.S. As the Treasury General Account (TGA) declines and net debt issuance is restrained, liquidity conditions should remain supportive for risk assets. With the Fed likely ending the Treasury portion of its balance sheet runoff in the next one to two quarters, markets could see even more relief from liquidity tailwinds.
2) Policy Uncertainty Is Slowing Growth, But Not Breaking the Economy
While corporate confidence remains high due to expectations of business-friendly policies, the data shows a real slowdown in U.S. economic growth. Elevated policy uncertainty—at levels seen only during the Global Financial Crisis and the COVID-19 pandemic—is causing businesses and consumers to hesitate on investment decisions. However, Darius does not see this leading to a recession but warns that prolonged uncertainty could trigger renewed hard-landing fears that weigh on markets.
3) Clarity On Bad Policies + Uncertainty Regarding Good Policies = Risk Assets Struggle
Darius revisits his Triple S Framework—Size, Sequence, and Scope—to assess Trump’s potential economic policies, again, emphasizing that sequence is the critical risk factor. If restrictive measures like tariffs and immigration control are implemented first, they could tighten the labor market, drive up wages, and fuel inflationary pressures. Conversely, if pro-growth policies such as tax cuts and deregulation come later, they may help offset these effects. Ultimately, the market’s reaction will depend on the order in which these policies unfold.
Final Thought: Risk On For Now, But Stay Nimble
Despite policy-driven risks, the current market regime remains risk-on, favoring a buy-the-dip strategy in higher beta and cyclical assets. Emerging markets and international equities have outperformed recently, and relative economic trends suggest that outperformance could continue. But with historic policy uncertainty clouding the road ahead, investors should remain adaptable.
If you are not confident your portfolio is positioned correctly for the evolving macro landscape , partner with 42 Macro’s data-driven insights and risk management processes to help you stay on the right side of market risk.
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