The paradox worth sitting with is that nearly every call here was right for reasons the macro community's standard framework would not have predicted. Hormuz did not matter because politics, not economics, determined the outcome. China stayed a trading market because the politics stayed ugly regardless of valuation. European defence fell because capacity build-out outran the political narrative that justified the trade. Inverting the process to put politics first is a genuinely different epistemology than the fundamentals-first approach most institutional research, including the consensus data I track, is built on.
The Japanese banks expression of JGB bearishness is the cleanest trade idea in this piece, because it sidesteps the Japan overweight that 39% of tactical allocators hold broadly and instead isolates the rate-sensitive sector that benefits specifically from rising yields. That distinction, sector exposure versus regional exposure, is exactly the kind of granularity that aggregate positioning data misses.
If politics now leads economics, the question is whether that is a temporary feature of this geopolitical moment or a permanent change in how markets should be read.
Hi Russell, do you have any ideas on why interest rates are coming down? After Warsh's speech the dollar rallied hard, but interest rates went down in the US. I find this puzzling.
I think, markets still see the central banks as driving market, where as I see fiscal policy driving markets. If you believe CBs control markets, tightening policy is deflationary, and you should buy bonds. Whereas I see government spending continuing to rise - so interest rate policy has no effect on inflation.
Counterargument is that equities in the end are real assets, so maybe could be that the trade is real assets over financial assets no? And another trade now suffering is the short USDCHF - but maybe it’s in both cases just a matter of time frame and accepting that both GLD/SPX and the Swiss Franc performed nicely in 2025
The paradox worth sitting with is that nearly every call here was right for reasons the macro community's standard framework would not have predicted. Hormuz did not matter because politics, not economics, determined the outcome. China stayed a trading market because the politics stayed ugly regardless of valuation. European defence fell because capacity build-out outran the political narrative that justified the trade. Inverting the process to put politics first is a genuinely different epistemology than the fundamentals-first approach most institutional research, including the consensus data I track, is built on.
The Japanese banks expression of JGB bearishness is the cleanest trade idea in this piece, because it sidesteps the Japan overweight that 39% of tactical allocators hold broadly and instead isolates the rate-sensitive sector that benefits specifically from rising yields. That distinction, sector exposure versus regional exposure, is exactly the kind of granularity that aggregate positioning data misses.
If politics now leads economics, the question is whether that is a temporary feature of this geopolitical moment or a permanent change in how markets should be read.
Hi Russell, do you have any ideas on why interest rates are coming down? After Warsh's speech the dollar rallied hard, but interest rates went down in the US. I find this puzzling.
I think, markets still see the central banks as driving market, where as I see fiscal policy driving markets. If you believe CBs control markets, tightening policy is deflationary, and you should buy bonds. Whereas I see government spending continuing to rise - so interest rate policy has no effect on inflation.
Hey Russell, I’m a fan, but one core view that actually has not really played out is GLD/SPX - not sure what does it mean in your framework
Very valid... but probably just a more extreme version of GLD/TLT... I assumed gold would outperform financial assets. Having a think about this
Counterargument is that equities in the end are real assets, so maybe could be that the trade is real assets over financial assets no? And another trade now suffering is the short USDCHF - but maybe it’s in both cases just a matter of time frame and accepting that both GLD/SPX and the Swiss Franc performed nicely in 2025
I guess both gold and CHF are just bets on the Fed not raising rates? That is how they are acting...