Paradigm C And The Resilience Premium

Darius Dale recently joined Anthony Pompliano on The Pomp Podcast to discuss the recent shift towards Paradigm C, the resilience of the U.S. economy, and the evolving roles of stocks, Gold, and Bitcoin within this new policy regime. If you missed the segment, here are three key takeaways that likely have huge implications for your portfolio:

1) Paradigm C Points to a Bull Market

Darius believes the bond market “broke” President Trump on April 9, prompting a shift away from Paradigm B’s economic pain toward Paradigm C—essentially a supercharged return to Wall Street-friendly policies. With trillions in tax cuts and supply-side incentives, this pivot supports the view that stocks may reach new all-time highs by the end of 2025.

Key Takeaway: A shift to Paradigm C increases the likelihood of a strong bull market and record highs by year-end 2025.

2) The Economy Is Stronger Than It Looks

Despite weak headline GDP, underlying data shows strength. Consumers—especially wealthier ones—still have cash to spend, and the services sector continues to drive economic resilience.

Key Takeaway: Don’t be fooled by soft GDP prints—the services sector is powering a resilient economy.

3) Policy Volatility Is the Real Risk

While current trends suggest a favorable outcome under Paradigm C, Darius warns that policymakers may misread market strength as validation, triggering a pivot back to Paradigm B’s aggressive negotiating tactics. Such a shift could destabilize the bond market and reverse recent gains in risk assets. The fragility of global capital account imbalances underscores the risk of heavy-handed tactics.

Key Takeaway: Markets may rally under Paradigm C—but incremental policy missteps could quickly reintroduce downside risk.

Final Thought: Stick To The Process

The market’s optimism hinges not just on policy outcomes, but on the clarity and consistency of those outcomes. As investors price in a shift toward Paradigm C—with its Wall Street-friendly monetary and fiscal largesse—any renewed flirtation with Paradigm B could reintroduce volatility and downside risk. Contextualizing policy signals within the context of our paradigm A-B-C framework and remaining prepared to dispassionately respond to policy pivots will be essential for navigating what comes next.

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.

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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.

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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

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.

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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

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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

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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

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Best of luck out there,

— Team 42

Dale: U.S. Growth Slowing Due To Policy Uncertainty

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.

THE MACRO CLASS

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Best of luck out there,

— Team 42

Is The Fed Fighting A Losing Battle Against Inflation?

Darius recently joined Charles Payne on Fox Business to discuss why the Fed’s inflation fight is failing, the limits of traditional economic indicators, and how Trump’s potential policies could impact markets. If you missed the appearance, Here are three key takeaways that could significantly impact your portfolio:

1) The Fed’s 2% Inflation Target is Unattainable

Darius has been warning since January 2022 that the U.S. economy’s equilibrium inflation rate is in the high 2% to low 3% range, making the Fed’s 2% target unrealistic. Despite recent disinflationary trends, inflation remains sticky, and the latest data reinforces the idea that the Fed won’t get back to 2% without causing serious economic damage. Rather than continuing its restrictive policy, the Fed should revise its target higher and adjust accordingly.

2) Traditional Economic Indicators Are Outdated

Darius argues that widely used indicators like the Leading Economic Index (LEI) are outdated and less relevant in today’s economy. Decades ago, manufacturing made up 30% of GDP and 50% of employment—today, it is only 10% of GDP and 14% of jobs. This structural shift means that many recession indicators don’t capture the strength of the modern economy, which remains resilient due to fiscal stimulus and liquidity dynamics.

3) Trump’s Policy Agenda Could Trigger Inflationary or Deflationary Shocks—Depending on Its Sequence

Darius outlines his Triple S framework—Size, Sequence, and Scope—to evaluate Trump’s potential economic policies. The biggest risk? Sequence. If tariffs and immigration restrictions are implemented first, they could disrupt supply chains, tighten the labor market, and push inflation higher before pro-growth policies like tax cuts and deregulation take effect. The market impact depends on how these policies are rolled out and whether the positives outweigh the negatives.

Final Thought:

Liquidity is likely to trend higher through mid-2025, which is supportive for asset markets. That said, policy-driven inflation risks and potential Fed missteps remain key threats. Investors would be remiss to rely exclusively on fundamental predictions amid a historically wide distribution of probable economic and policy outcomes.

If your risk management signals are not keeping you on the right side of market risk, parter with 42 Macro and join the thousands of investors benefiting from our KISS Portfolio Construction Process and our Discretionary Risk Management Overlay, also know as “Dr. Mo”.

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Best of luck out there,

— Team 42