Macro Outlooks

For the past several months, investors have enjoyed an unusually favorable backdrop. Economic growth has remained steady while the most disruptive waves of inflation have subsided. This period of tranquility has rewarded portfolios positioned for growth, and on the surface, the calm continues. But beneath that serene surface, the economic weather is set to turn. My analysis of the latest data reveals a series of subtle but important shifts. While no single data point is cause for alarm, together they signal that the period of easy gains is likely behind us and a more complex environment is emerging....

About a month ago, I wrote that our economy had found its sweet spot: a "Stable Growth & Disinflation" environment where a resilient economy and cooling inflation created a powerful tailwind for asset prices. I argued that the primary driver was fiscal dominance—massive government spending that forces the Federal Reserve's hand, keeping policy supportive. As of right now, that core thesis remains firmly intact. Our analysis of over 40 global markets confirms we are still in a sweet spot regime, which is broadly supportive of risk assets. Global liquidity continues to trend higher, and my primary quantitative models still show a strong uptrend for equities, credit, and hard assets. The long-term case for being invested is as strong as ever....

My main idea is that the economy, especially in the U.S., is in a sweet spot I call "Stable Growth & Disinflation." This means the economy is strong, inflation is cooling down but will likely stick around, and the government's policies are helping things along. This has been great for investments like stocks, bonds, and even cryptocurrency. I've looked at over 40 different markets, and the signs are overwhelmingly positive for these types of assets. The biggest reason for this is a major shift in how the government is running things. We're now in an era of "fiscal dominance," which is a fancy way of saying the government is spending a lot more money than it's taking in, creating large deficits. This spending pushes the economy forward. Because of this, the central bank (the Federal Reserve or "the Fed") has to keep interest rates relatively low to make it easier for the government to pay its bills. This setup basically puts a safety net under the economy and keeps pushing asset prices higher. The old trends that kept inflation super low for the past 30 years are gone. Now, government spending is the main driver of the economy....