Will Risk Assets Crash In 2025 Like They Did In 1998?

Darius recently joined Adam Taggart to discuss the likelihood of significant deficit reduction during President Trump’s administration, a potential global refinancing air pocket, and more.
If you missed the interview, here are the two most important takeaways from the conversation that have significant implications for your portfolio:

How Likely Is A Significant Reduction Of The Federal Budget Deficit Amid DOGE And Tax Cuts?

Although we believe DOGE is likely to achieve meaningful fiscal expenditure reduction, our analysis of U.S. federal budget dynamics highlights significant challenges to achieving meaningful deficit reduction. Cutting spending ≠ cutting the deficit, once extending and expanding the Tax Cuts and Jobs Act (TCJA) are accounted for.

Our research indicates that approximately 61% of the federal budget is effectively untouchable. This includes FFTT’s “True Interest Expense” metric, which comprises Medicare, National Defense, Net Interest, and Social Security. Collectively, these expenditures represent programs that are unlikely to face cuts amid the current populist political climate and are compounding at a rate of +13% per year. The remaining 39% of the budget has already been shrinking at a compound rate of -12% per year over the past three years.

Given these dynamics, we believe meaningful deficit reduction appears improbable without tackling politically protected categories.

Is A Global Refinancing Air Pocket On The Horizon?

At 42 Macro, we conducted a deep-dive empirical study on the global refinancing cycle and found it to be correlated with the global liquidity cycle. Currently, the lagged growth rate of global non-financial sector debt is accelerating sharply, and our models project this trend to continue through late 2025.

While conventional wisdom suggests this is likely to catalyze an increase in global liquidity, the risk remains that liquidity may fail to expand meaningfully, thus creating a global refinancing air pocket, similar to the divergences observed in 2008-09, 2011, 2015-16, 2018, and 2022, where the S&P 500 declined between 15% and 57%.

If global liquidity fails to follow the path of the year-over-year growth rate of world total non-financial sector debt, we believe it is likely to lead to severe disruptions—or even a meltdown—in global financial markets. However, we ultimately expect the dip will be bought because investors will finally find attractive valuations to bet on the AI supercycle amid tax cuts and deregulation. 1998 is a good analogy for how we are approaching financial market risk in 2025.

Since our bullish pivot in November 2023, the QQQs have surged 44% and Bitcoin is up +201%.

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.

Conditions Are In Place For Market Crash In 2025

Darius recently joined David Lin to discuss the impact of tariffs, the outlook for inflation, the role of gold in our KISS Model Portfolio, 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. How Are Tariffs Likely To Impact Asset Markets In 2025?

We believe China is likely to respond to tariffs by significantly devaluing the yuan, which carries profound implications for global asset markets. Historically, when China devalues the yuan, other major economies follow suit with sympathy devaluations to maintain competitiveness. During the 2018-2019 trade war, this dynamic led to broad-based declines in the euro, Japanese yen, British pound, and Swiss franc—on top of the yuan’s depreciation—resulting in a materially stronger U.S. dollar.

If a similar pattern emerges in 2025, we could see a sharp appreciation of the U.S. dollar in the second half of the year, potentially reinforced by a less hawkish Federal Reserve. This would likely lead to higher interest rates, rising bond market volatility, elevated currency market volatility, and a stronger U.S. dollar – all of which are headwinds for global liquidity.

Given the historic scale of global refinancing needs in 2025, we believe any liquidity contraction is likely to trigger a severe market correction – and potentially even a full-scale crash.

2. What Is The Outlook For Inflation?

According to our GRID Model projections for Headline CPI and the econometric study of all the postwar economic cycles in and around recession we conducted, we believe US inflation is unlikely to return durably to trend in the absence of a recession, which implies the highest probability outcome is inflation firming over the medium term against easing base effects.

Leading indicators of inflation also support our hawkish NTM inflation outlook. Core PPI, a reliable leading indicator for inflation in this business cycle, began breaking down approximately 18 months before Core CPI and Core PCE. Core PPI bottomed in December 2023 and has been trending higher since.

Moreover, Core CPI and Core PCE deflator appear to be stabilizing at an above-trend level. These metrics may accelerate in 2025 before resuming the longer-term downtrend, and the key risk is that consensus expects inflation to keep falling, and a rebound in inflation—however modest—could force markets to price out additional Fed rate cuts for 2025 and 2026.

3. Why Did We Replace Core Fixed-Income Exposure with Gold in Our KISS Model Portfolio?

We incorporate gold into the portfolio to enhance diversification by reducing overall beta and introducing non-correlated asset classes, which helps mitigate drawdowns and volatility while also providing exposure to Fourth Turning monetary policy dynamics. Gold serves as a low-beta asset, with a trailing six-month beta of approximately 0.3 to the S&P 500.

Moreover, the addition of gold to KISS reflects our understanding that if our Investing During A Fourth Turning Regime analysis proves true over the long term and the Fed is forced to accelerate financial repression and monetary debasement, it is highly unlikely that bonds will outperform other assets on a real, risk-adjusted basis.

We expect monetary debasement and financial repression to be tools that the Fed employs to address the challenges of excessive sovereign debt and a robust economy that leaves little incentive for buyers of government bonds, and we believe gold will prove to be a far better hedge against accelerated monetary debasement and financial repression than bonds.

Since our bullish pivot in November 2023, the QQQs have surged 44% and Bitcoin is up +201%.

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.

Here’s Why 2025 Will Be A Tricky Year For Investors

Darius recently joined Cheryl Casone on Fox Business to discuss the current risk-on Market Regime, the medium-term drivers of asset markets, the impact of upcoming fiscal and regulatory policy changes, and more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio:

We are currently in a risk-on Market Regime, and we anticipate that risk-on condition may generally persist for the next ~three months due in large part to a likely $700-800bn decline in the Treasury General Account (TGA). In risk-on Market Regimes, investors are typically rewarded for taking on high-beta, cyclical exposures, such as consumer discretionary, technology, financials, and industrials.
As we move further into 2025, the key issue for asset markets is likely to be the significant changes coming from fiscal and regulatory policies. Some of these initiatives should be positive for asset markets, including tax cuts, much more M&A, and DOGE, while others, such as tariffs, a too-strong USD, and stagflation lowering the strike price of the “Fed put,” may have negative implications. For investors, the challenge is to understand the size, sequence, and scope of these policy changes. Ultimately, navigating the sequence of policy changes effectively will determine whether you make or lose money as an investor over the medium term.
Earlier this month, Fed Chairman Jerome Powell’s press conference marked the end of the Fed’s asymmetrically dovish reaction function, which they had effectively maintained from November 2023 through December 18, 2024. This reaction function supported the buoyant asset market performance throughout the year that we have persistently called for. However, the Fed’s approach to monetary policy moving forward will likely be more balanced, with a nuanced view of labor market and inflation risks. This shift places the responsibility back to us as investors to accurately forecast where the labor market and inflation are headed, as these will ultimately determine policy decisions.

Since our bullish pivot in November 2023, the QQQs have surged 43% and Bitcoin is up +169%.

If you have fallen victim to bear porn and missed part—or all—of this rally, it is time to explore how our KISS Model Portfolio 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.

Why Crypto Is An Important Asset Class For Millennials

Darius recently joined Charles Payne on Fox Business to discuss the impact of last week’s FOMC decision and Chair Powell’s press conference, the outlook for liquidity, how to invest successfully during this Fourth Turning, and more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio:

While the Fed’s reaction function remains dovish, we believe it is likely no longer asymmetric. With the Fed now adopting a more balanced assessment of risks, the responsibility shifts back to us as investors to accurately forecast where the labor market and inflation are headed, as these will ultimately determine policy decisions.
The outlook for US liquidity remains positive. As long as the Democrats do not extend or eliminate the debt ceiling during Biden’s administration – and it appears they will not – the Treasury General Account balance is likely to be spent down to zero within the first four to five months of 2025. This development would be bullish for asset markets.
The current Fourth Turning is defined by factors such as excessive fiscal policy, monetary debasement, and financial repression. This macroeconomic backdrop is structurally bullish for stocks, credit, cryptocurrencies, and commodities. It is structurally bearish for Treasury bonds and the U.S. dollar. We believe the crypto asset class holds significant importance for Millennials because they recognize that the current system is not working in their favor, and investing in crypto is a “calculated gamble” on an alternative future in which the gap between the haves and have-nots is much narrower.

Since our bullish pivot in November 2023, the QQQs have surged 42% and Bitcoin is up +167%.

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.

Will Risk Assets Power Ahead Into And Through Year End?

Darius recently joined Paul Barron on the Paul Barron Network, where they discussed 42 Macro’s three bullish fundamental themes, the key economic cycles that lead asset markets, and more.

If you missed the interview, here are the two most important takeaways from the conversation that have significant implications for your portfolio:

1. When Should Investors Brace For A Significant Market Downturn?

We remain confident in the fundamental bull base for asset markets through early-Q2.

Our outlook is supported by three of our four core fundamental themes:

Our “Resilient U.S. Economy” theme, which we authored in September 2022.
Our “Here Comes The Liquidity” theme, which we introduced in September 2024.
Our “Jay Wants A Soft Landing” theme, which expresses our view that the Fed has an asymmetrically dovish reaction function that is geared towards engineering a soft landing in the US economy.

Combined, these three themes suggest increased liquidity, upside surprises in growth, and an accommodating Federal Reserve – all factors that indicate a favorable environment for risk assets over the medium term.

However, looking beyond Q2 2025, we anticipate asset markets are likely to face downside risks, such as a global refinancing air pocket. TBD on that.

2. What Implications Do Sidelined Cash And Growing Credit Stress Among Retail Consumers Have For Asset Markets?

Our empirical research shows that credit delinquencies and “cash on the sidelines” have limited significance in the current market context because they are lagging indicators. Historically, these factors shift after broader asset markets and the overall economy have moved.

In contrast, our deep-dive empirical study of business cycle dynamics has identified four key cycles that consistently lead asset markets:

Policy
Liquidity
Growth
Corporate Profits

These cycles are the primary drivers behind significant swings in asset markets. While real-time data on these factors is not always available, developing an informed perspective on their trajectories enables a more credible and forward-looking approach to anticipating market movements.

Since our bullish pivot in November 2023, the QQQs have surged 39%. Momentum $MTUM is up +51% and Bitcoin is up +184%.

If you have fallen victim to bear porn and missed part—or all—of this rally, it’s time to explore how our KISS Model Portfolio 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 macro insights to help you grow your portfolio—our way of saying thanks for being part of our global #Team42 community of thoughtful investors.

How Will The Republican Sweep Impact Asset Markets Over The Long Term?

Darius recently sat down with Macro Voices’ Erik Townsend, where they discussed the implications of the US election, how monetary policy dynamics are likely to change during the Fourth Turning, and more.

If you missed the interview, here are the two most important takeaways from the conversation that have significant implications for your portfolio:

1. How Will The US Debt-to-GDP Ratio Fare Under President-Elect Trump?

At 42 Macro, we have evaluated the proposals each candidate has put forward on the campaign trail through September 30th of this year. Our research indicates that Kamala Harris’s proposals would have accumulated approximately $3.5 trillion in additional U.S. sovereign debt over the 10-year projection period relative to the baseline. On the other hand, if we add up the various income and spending proposals from the Trump campaign, the increase is approximately $7.5 trillion.

Despite President Trump winning the election, our research indicated the US debt-to-GDP ratio would likely accelerate dramatically no matter who won the election or which party controls Congress.

Moreover, under current law, with the Trump tax cuts set to expire at the end of 2025, the debt-to-GDP ratio is projected to reach 125% in 10 years. With Harris’s proposals, the ratio would have been projected to increase to 133% over the same period. Trump’s proposals are likely to push it to 142%.

2. How Are Monetary Policy Dynamics Likely To Evolve In This Fourth Turning?

In our deep-dive empirical study on the Fourth Turning, we explore how monetary policy dynamics have evolved in previous Fourth Turnings and how they are likely to evolve in this Fourth Turning.

In our deep dive, we found that the key monetary policy risks in a Fourth Turning include significant financial repression and monetary debasement:

Financial Repression: We believe investors should prepare for increased financial repression because banks currently have ample capacity to lend to the Treasury market. Our research indicates commercial banks’ holdings of Treasury and agency securities are currently approximately 18% of total bank assets, compared to nearly 50% during the peak of the last Fourth Turning. We anticipate that regulators, including the Fed and other international bodies, are likely to pressure banks and other financial institutions (e.g., pension funds, insurers, asset managers) into holding more Treasuries. This is likely to keep policy rates significantly below what could be elevated rates of inflation as we move further into this Fourth Turning.
Monetary Debasement: We believe investors should anticipate monetary debasement as the private sector, increasingly relied upon to fund the U.S. government, is likely to demand higher yields. Our research shows that the Federal Reserve’s Treasury holdings have declined to only 16% of total marketable Treasury debt. Meanwhile, commercial banks now hold around 15%, and foreign official holdings make up 14%. The remaining share, largely held by the global private sector, has surged from 36% in late 2021 to 54% currently. In our view, this growing reliance on the private sector to finance U.S. public debt has significantly contributed to the recent rally in bond yields and the rise in real interest rates across the yield curve, both in the U.S. and globally. The key takeaway is that, given the already deteriorating U.S. public sector balance sheet, this trend is likely to worsen dramatically. We recognize that only one institution has a balance sheet large enough to sustain U.S. public debt in a Fourth Turning scenario: the Federal Reserve.

Both of these dynamics are likely to lead to an acceleration in money supply growth, which we believe is likely to inflate the value of risk assets such as stocks, credit, crypto, commodities, and gold throughout the Fourth Turning.

There will be some significant crashes in these assets to risk manage along the way when public sector debt growth vastly exceeds the amount of monetary debasement and financial repression available at the time, leading to a global refinancing air pocket. We anticipate the Fed will respond to future refinancing air pockets with more monetary debasement and more financial repression, leading to renewed bull markets from higher lows in the prices of risk assets. They don’t have a choice.

Investors that maintain access to our KISS Model Portfolio or Discretionary Risk Management Overlay aka “Dr. Mo” signals will sleep comfortably at night while participating in the high-stakes, Fed-sponsored bull market we anticipate will vastly exceed the wildest imaginations of investors.

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.

Stock Market Predictions To End 2024!

Darius recently joined our friend Anthony Pompliano, where they discussed the 42 Macro Global Macro Risk Matrix, the outlook for the global economy, AI-related productivity growth, 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 Does Our Global Macro Risk Matrix Indicate About The Direction of Asset Markets?

We are currently in an era of peak noise. At 42 Macro, we help our clients cut through the noise, and our Global Macro Risk Matrix is one of the most powerful tools we have built to do that.

Looking at our Global Macro Risk Matrix, we have seen a battle between GOLDILOCKS and DEFLATION since the end of June. Currently, DEFLATION has the highest share of confirming markets, but the strength of that signal is low—only in the 27th percentile of data going back to January 1998.

This suggests that market participants are still uncertain which Market Regime will prevail. We expect this debate is likely to resolve in favor of GOLDILOCKS, but we could see asset markets price in DEFLATION over the short term.

2. How Will The Global Economy Influence Asset Markets Over The Medium Term?

At 42 Macro, we provide historical data and forward projections for the Bottom-Up GRID Regime across major global economies.

According to our models, many economies are in or moving toward a GOLDILOCKS regime through the end of this year.

In our view, this shift could create positive momentum for asset markets in the medium term. Although the U.S. economy’s GRID sequence generally carries more weight than the rest of the global economies, it is promising to see global economies providing tailwinds rather than the headwinds experienced from mid-2021 to the end of 2023.

3. How Will AI Impact Asset Markets Moving Forward?

Productivity growth is positive for asset markets because it allows the economy to grow with disinflationary pressure. When productivity rises, you typically see margin expansion, which supports labor market growth without triggering the inflationary impulses that would cause corporations to cut jobs – a dynamic that persists today.

However, we believe we have not yet seen substantial productivity gains from AI.

As a result, we do not believe AI will be the dominant driver of asset markets in the near term. That said, if AI turns out to be as significant as many expect, it will have an enormous impact on the future of the economy.

That’s a wrap!

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.

How To Win In The 2024 Financial Marketplace

Darius hosted our friend Scott Diddel on this month’s Pro to Pro, where they explored Scott’s comprehensive presentation on understanding the basics of how to allocate assets from a tax-advantaged perspective.

If you missed the interview, here are the three most important takeaways from Scott’s presentation that can help you plan for your financial future:

1. How Do Inflation And Taxes Impact Long-Term Investments?

The impact of inflation and taxes on long-term investments is staggering.

A $1 investment in large-cap stocks from 1926 would have grown to $2,533 today without the impact of inflation and taxes. When taking into account the impact of taxes alone, the amount is reduced to $672. When both taxes and inflation are considered, the value plummets to $48. This represents a shocking 98% decrease from the nominal return to the actual return in your bank account.

Allowing your money to sit idly exposes it to the erosive effects of taxes and inflation. As an investor, you should actively strategize to implement tax-efficient strategies and preserve your wealth over time.

2. What Are The Tax Implications of Different Investment Vehicles?

Investment vehicles are categorized based on their tax treatment: “Tax Later,” “Tax Now,” and “Tax Once and Never Again.”

Qualified plans like 401(k)s and IRAs fall under “Tax Later,” offering tax-deferred growth until you withdraw the investment. “Tax Now” includes outside investments, such as stocks and bonds, which generate taxable income annually. Lastly, the “Tax Once/Never Again” category features options like Life Insurance Retirement Plans (LIRPs), providing tax-free growth and distributions.

Understanding these distinctions is crucial for optimizing your investment strategy. Each category offers unique advantages, allowing investors to tailor their portfolios to their specific financial goals and tax situations.

3. How Can A Life Insurance Retirement Plan (LIRP) Enhance Retirement Distributions?

A Life Insurance Retirement Plan (LIRP) can significantly boost after-tax retirement income.

In a scenario without a LIRP, a desired $250,000 distribution results in only $170,000 after taxes. By incorporating a LIRP, the same distribution yields $208,000 after taxes. This $38,000 annual difference amounts to an additional $760,000 over a 20-year period.

LIRPs achieve this through tax-free growth and distributions, complementing traditional retirement accounts and outside investments. This powerful tool offers a tax-efficient way to supplement retirement income, helping you earn additional income in your retirement years.

That’s a wrap!

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 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 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.

How Much Longer Can The Bull Run Last?

Darius joined our friend Paul Barron this week to discuss the outlook on inflation, Bitcoin, the US economy, 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. Inflation Is Likely To Decline Over The Next Three To Six Months

At 42 Macro, we find it more insightful to track inflation using three-month and six-month rates of change than the year-over-year rate, which tends to meaningfully lag the market cycle.

Using the three-month rate of change, our analysis indicates a significant increase in the rate at which shelter CPI and housing PCE are decelerating, indicating that the general trend of inflation is heading lower over the medium term.

However, if asset markets remain buoyant, the anticipated disinflation priced into consensus expectations and forecasted by the FOMC may not materialize over the medium term.

2. Although Bitcoin Is Likely To Reach High Valuations, The Path To Get There Is Uncertain

In the interview, Darius and Paul watched a clip from the All-In podcast in which Chamath Palihapitiya, the founder, and CEO of Social Capital, discussed potential price targets for Bitcoin over the next 18 months. Darius agreed with two aspects of Chamath’s analysis: omitting data from the first cycle and including time horizons for the price targets.

However, we believe his analysis lacked a critical component: the path Bitcoin takes to reach those targets. To that point, we have yet to experience the typical median max drawdown seen in liquidity cycle upturns. Our research indicates that the median max drawdown for Bitcoin in a liquidity cycle upturn is around -61%.

A decline of just half of that magnitude will cause many investors to exit their positions prematurely. At 42 Macro, our goal is to help investors stay in the market while avoiding significant drawdowns of their portfolio along the way.

3. Growth And Inflation May Pose Risks To Markets As We Reach Q1 2025

As we head into 2025, two primary risks loom over the markets.

First, growth is likely to slow to levels that would worry many investors by Q1 2025. Second, inflation is likely to bottom out sometime in Q4-Q1 at a level inconsistent with the Fed’s 2% target.

Overall, we remain in a risk-on Market Regime and do not yet believe it is time to book the significant gains we and our clients have achieved since we called for the bull run at the start of November. However, after the next three to six months, forward-looking markets will likely recognize that growth and inflation trends in 2025 may not be as supportive as they are now.

That’s a wrap!

If you found this blog post helpful, explore our research for exclusive, hedge-fund-caliber investment insights you can act on today.

Navigating Conflicting Economic Data

Darius joined Charles Payne on Fox Business last week to discuss the US economy, inflation, the Fed, and more.

If you missed the interview, here is the most important takeaway from the conversation that has significant implications for your portfolio:

Recent Economic Data Gave Conflicting Signals To Investors. A Systematic, Rules-Based Investing Approach Is The Best Method To Generate Positive Returns In Today’s Confusing Macro Environment.

Although growth is slowing from the well-above-trend pace we saw last year, the economy remains resilient. We currently see a low probability of a developing recession in the US economy, but that may change in the coming weeks/months per the latest data.
If inflation persists above trend, the Federal Reserve may postpone any dovish measures. Coupled with the Treasury’s policy of tighter net financing conditions, this scenario could cause a shift to a risk-off Market Regime.
During most of the bull run that occurred since late October 2023, monetary and fiscal policies were aligned, supporting asset markets. Currently, however, monetary policy remains dovish, largely disregarding inflation data, while the Treasury’s net financing policy has become more hawkish at the margins. As we move into the third quarter, this policy shift could become burdensome for asset markets.

That’s a wrap!

If you found this blog post helpful, go to www.42macro.com to unlock actionable, hedge-fund-caliber investment insights.