Has the Crypto Collapse Concluded?
Welcome to The Weekly!
This past week’s market action reinforced just how much uncertainty there remains surrounding U.S. monetary policy. Cross-asset volatility surged following the nomination of Kevin Warsh for Fed Chair, a development that boosted the dollar and reversed crowded positioning in precious metals and levered bets on cryptocurrencies predicated on expectations of durable Fed debt monetization.
Warsh’s reputation as an aggressive inflation hawk — and his long-standing criticism of quantitative easing — has intensified speculation around balance sheet contraction and the durability of liquidity support. Warsh has vocally criticized his former colleagues at the Fed for allowing asset holdings to swell, fueling market speculation that a Warsh Fed would oversee a substantial shrinking of the balance sheet.
Meanwhile, Treasury Secretary Scott Bessent’s incremental endorsement of dovish net financing policy remains a key pillar supporting the 42 Macro Paradigm C bull market, even as uncertainty around the Fed’s role in supporting fiscal dominance reaches an all-time high.
All the same, growing cracks in legacy software stocks added further evidence in support of our Jobless Recovery thesis, as AI-driven efficiency gains and competitive pressures continue to disrupt labor demand. Crypto markets likely marked a capitulation low, but Warsh’s nomination may represent a durable headwind to non-Bayesian narratives underpinning the asset class.
In an environment this uncertain, now is not the time to be a hero. This is the moment to trust your risk management process or partner with a team that can meaningfully enhance it.
In Case You Missed It
What Does The Breakdown in Legacy Software Stocks Signal About the US Labor Market?
Enjoy Tuesday’s Macro Minute in which we explain why the breakdown in legacy software stocks is reinforcing 42 Macro’s Jobless Recovery thesis, as AI-driven disruption erodes once-defensible business models and pressures labor demand.
While firms continue to hoard experienced workers, hiring for younger and less-tenured cohorts is deteriorating, masking underlying labor market weakness.
Charts of the Week
“HODL’ing” Is Not Effective Risk Management
We hope this latest halving in the price — not supply — of Bitcoin highlights why “HODL’ing” is not a substitute for an effective risk management strategy.
Volatility is part of the journey for any investment, but navigating it successfully requires process and discipline.
Successful Signals From Dr. Mo
On October 30th, 2025, our Discretionary Risk Management Overlay signaled a bearish breakdown in Bitcoin. Since the pivot, Bitcoin has depreciated -36%, with a max drawdown of -50%.
Community Spotlight
This week, we’re excited to share feedback from a member of our global investor community. Specifically, the results that come from incorporating 42 Macro’s risk management overlay to your investment process.
It’s gratifying to see KISS and Dr. Mo create so many positive outcomes for investors around the world. Thank you!
Parting Shot | Bounded Rationality
Markets don’t overwhelm investors because the data is unknowable. They do because time, attention, and certainty are limited.
Behavioral economists call this bounded rationality: even smart decision-makers can’t process everything at once. When volatility rises and narratives collide, judgment shortcuts creep in and risk management breaks down.
Learn how our Discretionary Risk Management Overlay aka Dr. Mo helps investors stay systematic when it matters most.
EXPLORE 42 MACRO RESEARCHIs Fiscal Policy Still the Defining Feature of This Cycle?
Welcome to The Monthly!
Markets entered 2026 grappling with another wave of geopolitical stress and policy uncertainty. Efforts to revive Venezuela’s energy output, the Fed being issued subpoenas by the DOJ, and tariff threats on an assortment of European countries by the Trump administration all heightened short-term volatility.
As we have emphasized consistently, investors should stop overreacting to geopolitical noise and return to the disciplined work of measuring and mapping the six key macro cycles that determine momentum and dispersion within and across asset markets—growth, inflation, monetary policy, fiscal policy, liquidity, and positioning.
Growth, inflation, and liquidity are already acting as tailwinds, while fiscal policy is highly likely to turn supportive in 2026—potentially helping markets navigate elevated volatility stemming from historically crowded bullish positioning.
Monetary policy remains a wild card, especially with the nomination of Kevin Warsh—a known hawk—as Fed Chair. Our research was already calling for no change in monetary policy this year based solely on our economic outlook and the latest forward guidance from members of the FOMC.
Warsh’s contentious nature and strong desire for dramatic reforms at the institution may derail the outlook for monetary easing altogether if the incumbents at the Fed dig in to defend their broken models and legacy of policy mistakes. Stay tuned.
In Case You Missed It
Are Portfolios Prepared for a Productivity Boom?
On Fox Business, Darius joined Maria Bartiromo to explain why a structural uptrend in U.S. productivity is becoming the dominant macro force for markets.
The US economy is likely transitioning from a trend 2% productivity regime toward a trend 3% productivity regime—a shift that historically has coincided with stronger equity returns and faster corporate profit growth.
Should Investors Stay Overweight Equities Into 2026?
On BNN Bloomberg, Darius joined Merella Fernandez to explain how markets remain supported by an alignment of key macro cycles.
Chart of the Month
FYI, We Keep Saying “Perceived Independence” Because The Fed Is Not Independent As Evidenced By Their Clear Left-Leaning Bias; Recall That The FOMC’s Revised Interpretation Of Its Congressional Mandate To Seek “Maximum And Inclusive Employment” Was Causal To This Historic Policy Error In 2020–21
The narrative in the media and across global Wall Street that the Fed is a politically independent institution and the victim of politicized attacks is just that—a narrative. Sure, the Fed is currently a victim of politicized attacks, attacks that we strongly disagree with. Central bank independence is non-negotiable for any advanced society to function well.
But the aforementioned narrative still represents a convenient story concocted by the incumbent US monetary policymaking cabal to distract the public from its legacy of policy errors; most notably the error that contributed to the ongoing nationwide affordability crisis and K-shaped economy.
The lack of accountability (e.g., blaming the pandemic and Russia’s invasion of Ukraine for the 40-year high in inflation) and unwillingness to explore meaningful reforms (e.g., abandoning the broken Phillips curve framework, backward-looking “data dependency”, and noisy overcommunication) among members of this cabal is simply un-American.
Trust The Process: Successful Signals From Dr. Mo
Discretionary Investment Ideas Summary: Tuesday, October 31, 2023
On October 31, 2023, our Discretionary Risk Management Overlay signaled a bullish breakout in Gold $GLD. Since the pivot, $GLD has appreciated 142%.
As always, we’ll be back next month with updated insights on all things 42 Macro.
— Team 42