Jan 23, 2026, 4:30 AM ETInterview, Fireside Chat

Will macro tailwinds drive stocks higher?

U.S. Equity Underperformance: U.S. assets have shown relative underperformance in early 2025, while non-U.S. regions and specific sectors have demonstrated significant outperformance despite the S&P 500 remaining largely flat year-to-date.
High-Velocity Sector Moves: Significant gains have occurred in specific niches:
- Gold up 12%.
- Silver up 30%.
- Korean equities up 16%.
- Mining equities up over 20%.
- Homebuilders up 5–10%.
- Japanese banks up 10%.
- 30-year Japanese Government Bond (JGB) yields up 30 basis points.
Broadening Leadership: Market leadership is shifting from a narrow "AI" concentration to a broader cyclical upgrade, driven by above-trend growth expectations and tax rebates.
Bond Market Breakout: After months of range-bound trading, the U.S. bond market has broken out to the upside, with yields rising in response to stronger growth and fiscal concerns.
Currency Trends: The U.S. dollar remains range-bound and choppy, while the USD/CNH (Chinese yuan) pair has strengthened and is expected to continue its upward trend.
Japan's Dual Rally: Japan is executing a classical "growth trade" with both equities rising and bond yields climbing, supported by deeply negative real policy rates.

Fed Policy Trajectory: The Federal Reserve is expected to hold rates through the spring under current leadership, with 2–4 rate cuts anticipated in the second half of 2025.
- Total cumulative cuts estimated between 50 and 100 basis points.
- The unemployment rate is identified as the critical variable for policy timing.
Interest Rate Environment: The year is characterized as "stocks up and rates up," shifting away from the 2024 dynamic of stocks up with rates down; this correlation change increases difficulty for equity valuations.
Curve Expectations: Bond markets are projected to end the year with a steeper yield curve, potentially a 20-basis point increase in the spread between intermediate and long-term rates.
Inflation and Affordability:
- Focus on housing affordability is viewed as a catalyst for disinflation, potentially returning the inflation target to 2% by 2026.
- A "good macroeconomic cocktail" is expected, combining strong growth with subdued inflation driven by affordability pressures.
2026 Projections: 2026 is forecast to be the "year of global growth" and the conclusion of the five-year elevated inflation period, moving toward a more balanced inflation outlook.

Non-U.S. Focus: Investors are advised to reduce reliance on the U.S. dollar and S&P 500, instead seeking exposure in:
- Japan: Cited as a top driver for global bond markets with an attractive sector mix (semis, AI, defense) and shareholder reform themes.
- North Asia: Korean equities and regional growth stories are identified as high-potential areas.
- Emerging Markets: China's currency and broader market dynamics remain key areas of interest.
- United Kingdom: Valuation cushions and out-of-focus status make UK equities an emerging opportunity.
U.S. Sector Opportunities: Within the U.S., attention is shifting to cyclically oriented sectors:
- Housing and construction.
- Consumer discretionary.
- Regional banks tied to domestic recovery.
Valuation Concerns: While the long-term bull case relies on 3% growth and double-digit earnings, current valuations are objectively high and positioning is demanding.

Tail Risks:
- Unemployment: The risk of a recession from a breaking unemployment rate remains low-priced in markets but is receding.
- Rate Risk: The primary near-term risk is upside yield pressure driven by fiscal stress and growth resilience.
- Geopolitics: Political and geopolitical tensions continue to support prices in gold and the precious metals complex.
- AI Unwind: A potential "AI unwind" is monitored as a micro-vulnerability, though not currently a core view.
Japan Specifics: Concerns exist regarding the sustainability of the current rapid move in Japanese yields; if volatility extends, it could self-defeat the growth story, though real rates remain deeply negative.
Inflation Debate: A two-way debate has emerged regarding the speed of disinflation; while the consensus expects inflation to return to target, some market participants view a return to 2% as ambitious, citing concerns over electricity, labor, and data center build-outs.
Tariff Uncertainty: The Supreme Court ruling on tariffs remains a variable; if struck down, the replacement policy (e.g., fiscal stimulus or rollback) could impact affordability.

2025 Theme: Characterized as the "Year of the Tariff" (or Year of Policy Volatility).
2026 Theme: Projected to be the "Year of Global Growth" and the period where the inflation shock ends.
Structural Era: The broader multi-year narrative is defined as the "Era of AI," marking a period of emergence and growth.
Breadth Improvement: Market breadth is expected to improve as leadership spreads beyond mega-cap tech to cyclically geared sectors.