Two walls, one path between them, and the Fed has now stepped onto that path. One hike is already delivered, dot plots imply one more hike before year end. Below-trend growth remains the likely outcome either way: inflation still curtails growth the slow way if policy stops here; tighter conditions curtail it the fast way if the second move comes. Underneath both sits the same structural drag: a growing share of new debt funds interest costs rather than investment, and slower growth widens that gap rather than closing it. AI-led productivity is the one clear offset, and it may simply arrive too late to matter this cycle.
None of that argues for retreat: earnings are strong, and the bubble anatomy, demand over-estimation, unrealistic valuations, capital misallocation, unsustainable debt, doesn't confirm at any of its four stages. Markets' constructive reaction to the hike, possibly helped by signs of a geopolitical thaw, does not change the drivers. Macro and geopolitics remain the main factors. The growth bias stays, expressed through AI infrastructure rather than a blanket bet on the index. That's the needle. Confirmation, not anticipation, is how we thread it.
Modest overweight at the index level. Constructive post-hike price action; tech leadership reappearing. Still not full overweight: breadth at 28% and no sustained breakout above recent all-time highs. Growth bias via AI infrastructure (four-stage bubble anatomy: not yet at any stage), energy security, late-cycle materials and defence, not a blanket call.
US preferred at the index level on the growth differential (Euro area ~0.9% for 2026). ASML, Siemens, Schneider Electric and Legrand held as bottom-up exceptions regardless of the regional call.
North Asia ex-China still overweight, the best-evidenced regional call of the year. Between China and India, prefer China (a tech call, not a consumption vote); neither has a clear index-level catalyst.
Breadth breaking decisively above 60% (from 28% now); a clean, sustained breakout above recent all-time highs; tech leadership persisting, not just appearing in price action.
A second Fed hike, or a more restrictive path, landing badly after the first was absorbed; a reversal of the current geopolitical thaw; earnings faltering rather than just decelerating on schedule.
Neutral overall. Overweight duration progressively in the 5–10 year range on a flattening, front-end-led curve, sized for a hiking cycle that is underway, with dot plots indicating one more hike before year end. Quality over beta in credit (IG/BB; leave the CCC tail alone). Long hyperscaler CDS against long AI-equity exposure.
Gold preferred over fiat as the structural diversifier.
Copper and silver, highest-conviction metals, each on a distinct thesis. Tactically long oil, which also serves as an inflation hedge.
Prefer long/short equity, multi-manager platforms, and convertible / cap-structure / vol arbitrage (reduce directional bias; prefer centralised risk management). Cautious on new private credit and PE; Asian private credit, where protections are demonstrably stronger, is better positioned than Western peers.
VIX near the bottom of its 2026 range. Add convexity cheaply now.
