After a 15-year run of outperformance driven by low inflation, low growth, and massive fiscal stimulus post-2020, U.S. assets are poised to underperform. This shift is catalyzed by the U.S. bond market disciplining fiscal policy and a new administration actively discouraging foreign investment.
The global fiscal landscape has completely reversed. While the U.S. was the primary engine of fiscal stimulus post-pandemic, it is now being forced into consolidation, just as China and Europe begin to step on the fiscal accelerator to boost their own economies.
The Trump administration is sending a clear message to global capital: 'please go away.' This is being communicated through rhetoric and potential policies like a 'traffic light' system for foreign investors, creating uncertainty and actively pushing capital out of the U.S.
China is executing a major policy shift, moving away from a multi-year focus on building industrial resilience to actively promoting domestic consumption. This involves boosting lending to consumers, local authorities, and the real estate sector.
There is a significant, unquantified risk of a global margin call due to hidden leverage embedded in trillions of dollars worth of structured products sold by private banks. An adverse market event could cause these positions to go to zero, triggering a cascading wealth shock far larger than the Madoff scandal.
Keep pulling the thread on James Aitken, Marko Papic & Louis-Vincent Gave.