Interview, Fireside Chat
Will macro tailwinds drive stocks higher?
- U.S. equity markets are expected to remain flattish for the year, with a global bias toward outperformance and higher trends in non-dollar indices, Japan, North Asia, U.S. housing/construction, consumer sectors, regional banks, and UK equities.
- High-velocity trends are predicted to persist in gold, silver, Korean equities, miners, homebuilders, JGB yields, Japanese banks, and specific FX pairs, supported by geopolitical events sustaining precious metals.
- The U.S. bond market is forecast to experience a continued upside breakout in yields, with the yield curve likely ending the year steeper by potentially 0.2%, driven by a balancing act between rising growth and moderating inflation.
- The Federal Reserve is projected to maintain a "watch and wait" stance through the spring with no action, while holding the fund rate steady until the second half of the year.
- Under new leadership, the Fed is expected to implement between two and four rate cuts in the second half of the year, totaling between 50 and 100 basis points, with unemployment rates serving as the primary policy decision metric.
- The first half of the year is characterized by a cyclical upgrade narrative rather than inflation relief, though rates may rise despite moderating inflation if growth strengthens.
- Investors should monitor potential upside rate risks from better growth and fiscal stress, while noting that recession risk remains a low-priced tail risk that may be receding as global growth accelerates.
- Global growth is anticipated to drive stock market leadership broadening, with Japan expected to remain a key driver for global bond markets and the Chinese currency (Dollar CNH) continuing a broadly strong trend.
- Market dynamics are expected to shift this year toward a "stocks up and rates up" correlation, creating a tougher environment for equities as the market converges toward higher equities and higher intermediate-term real rates.
- Long-term timelines indicate an affordability narrative increasing the probability of a disinflation story emerging in 2026 with inflation returning to 2%, alongside the AI unwind remaining a micro vulnerability for the year.
- Policy levers related to housing may be deployed in the coming months, and a Supreme Court ruling striking down tariffs could trigger fiscal stimulus or tariff rollbacks to aid affordability.
- The current era is defined by the emergence and growth of AI, with 2026 projected as the year of global growth and the conclusion of the inflation shock.