It’s the Valentine’s Day & President’s Weekend’s Edition of the The Weekly!
In answer to the question:
No, this bearish scenario is unlikely according to our cyclical and structural research views related to the inflation cycle. The just released softer-than-feared inflation print spurred incremental conviction around prospective Fed easing, driving rates lower and leaving equities marginally changed as investors closed out a volatile trading week with a sigh of relief.
The recent correction instead likely signals an acceleration in AI diffusion. As we have detailed, a wider adoption of AI technology represents a durable positive shock to productivity, which represents a positive shock to corporate profitability and negative shock to trend inflation.
Related, the Resilient US Economy is recovering from its U-shaped slowdown, but the upturn is being propelled by fiscal expansion and government employment while private-sector hiring stagnates—setting up a jobless, AI-accelerated recovery with historic implications for inflation and corporate profits.
Make no mistake, understanding how these dynamics differ from past cycles is critical for navigating what comes next.
As always, members of 42 Macro’s global investor community will have deeper insights into our views and how our institutional-grade risk management overlays, KISS and Dr. Mo, help investors maximize gains in bull markets and minimize losses in bear markets.
In Case You Missed It
If Your Stomach Is Dropping From Market Ups And Downs, Here’s Why
Enjoy Forbes‘ recent piece (read here) examining the surge in cross-asset volatility as stocks, metals, and crypto all sold off in tandem.
As Darius highlights in the article, there is a key structural shift underway: a growing inverse relationship between dollar and currency volatility, driven by the growing geopolitical supply-demand imbalance in the Treasury market.
Chart of the Week
The Dramatic Underperformance Of Employment Growth Relative To The Growth Of Labor Supply Supports Our Jobless Recovery Thesis
Employment growth is dramatically underperforming relative to labor supply growth, supporting 42 Macro’s Jobless Recovery thesis. AI diffusion and capital deepening are boosting output and productivity without a commensurate rise in hiring.
Successful Signals From Dr. Mo
On November 29th, 2025, our Discretionary Risk Management Overlay signaled a bullish breakout in Global Commodity Producers $GNR. Since the pivot, $GNR has appreciated 21%.
Community Spotlight
This week, we’re glad to share a Valentine from a member of our global investor community. Specifically, the unmatched value that 42 Macro provides.
It’s always fulfilling to see KISS and Dr. Mo create positive outcomes for investors around the world. Thank you.
Parting Shot | The Cantillon Effect
Money is never neutral. It enters the system somewhere, and the first recipients benefit most.
The Cantillon Effect explains why new liquidity often lifts asset prices and government-supported sectors before it shows up in wages or broad consumer prices. The sequence matters.
In cycles shaped by fiscal expansion and shifting liquidity flows, identifying where capital is moving can be as, or even more important than reacting to headline data.
Explore 42 Macro’s KISS and Dr. Mo and discover the frameworks and signals that underpin our systematic approach to managing risk.
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