Attack the Week (ATW)
Cycles & Complex Systems / Weekly Calendar / Charts / Asset Allocation Model
Sunday Thoughts
This year is going to be fun. Market theorists often argue that January reflects the micro-picture of the year ahead. We, practitioners, however, want something a bit more concrete.
The first full trading week had a lot of action, indeed, and much of it has already impacted many cross-currents in commodities, stocks, bonds and the mighty Dollar.
As for every start of the year, I think about the road ahead. Cycles, not in the tidy, “market strategist” sense where a cycle is declared after the fact and then retrofitted into a narrative, but in the more ordinary sense of rhythm. Cycles show up in places we rarely label as “cyclical,” even though they clearly are. Mood, motivation, social cohesion, trust in institutions, appetite for risk, willingness to spend, willingness to fight, and even willingness to listen all seem to rise and fall. We tell ourselves that we are rational actors making linear decisions, but are we really?
Years ago, I knew a trader who claimed he traded purely on moon and tidal cycles, and I mean that literally. He mapped lunar phases and tidal patterns against the timing of turns, and he treated that rhythm as his primary input. I am not saying the moon causes markets to move, and I am not presenting this as something that can be systematised and sold. I am saying that it was unsettling how often he was accurate, and the experience stayed with me because it pointed to something I think markets constantly try to hide: human systems have rhythm, and markets are human systems.
Most people in finance are fixated on the day-to-day micro and macro, and I understand why. Data calendars are concrete, central bank meetings create focal points, and the market rewards reactivity in the short term because the tape forces you to make decisions. The problem is that this focus can become a trap, because it creates the illusion that more information equals more control. In complex systems, more information often just means more noise, more false certainty, and more temptation to overtrade. You can be “right” about the macro story and still lose money because the market does not pay you for being right; it pays you for managing risk through uncertainty.
So why look further out at all, if the future is not predictable? My honest answer is that it might be futile if you are trying to forecast precise outcomes. However, it is still useful if you are planning and preparing. A rough sense of the road ahead —probabilistic, imperfect, and easily revised — gives you room to build a process rather than merely react. It gives you time to think about what could break, where you are exposed, and what you would do if the regime changes, instead of discovering all of that in the middle of a drawdown.
This is where cycle theory has started to matter more in my own work. I used to think of cycles as something people talked about when they wanted to sound wise without being specific, and to be fair, that is sometimes true. But there is a more practical interpretation that I have found helpful. Cycle theory, at its core, is not about predicting dates on a calendar; it is about recognising that economies and markets tend to move through phases driven by constraints, incentives, and feedback loops. Credit expands, and then the cost of credit bites. Investment rises, and then capacity becomes excess. Inventory gets built, and then the system needs time to digest it. Confidence lifts, leverage follows, fragility accumulates, and then something — sometimes internal, sometimes external — forces a reset.
When I frame it that way, cycles become less like prophecy and more like a map of typical behaviours. A map does not tell you exactly what traffic will look like at 4:17 pm, but it does tell you where the bridges are, where the road narrows, and where the sharp bends tend to be. That is how I try to use cycle thinking: not to predict, but to locate areas where risk is more likely to be mispriced, where volatility can re-enter, and where the distribution of outcomes can widen even if the surface looks calm.
I also think complex systems behave in a broadly Bayesian way, in the sense that beliefs are continuously updated as new information arrives. The catch is that markets do not update beliefs cleanly. They update beliefs through positioning, narrative momentum, institutional incentives, and the reflexive effect of price itself. That means the “posterior” can be distorted, sometimes for long stretches, and then corrected violently. The future, of course, will never be predictable in a deterministic sense, but a roadmap can still be useful because it helps you think in ranges rather than in single outcomes.
The reason this feels particularly relevant now is that the dominant cycles are not purely economic. We are in an environment marked by social and geopolitical dynamics that are increasingly entangled with markets, and those forces have their own rhythms. Social trust, political legitimacy, polarisation, demographic pressure, migration, and geopolitical alignment do not move smoothly, and they rarely resolve neatly. When those cycles turn, they do not remain contained within “society” or “politics”; they spill into policy, supply chains, capital flows, and how risk is priced. That is why relying exclusively on the day-to-day macro can leave you underprepared, because the most consequential drivers are sometimes not the ones being discussed on the morning call.
In my own process, cycle theory has started to feel like a missing link for thinking further out. Macro helps me frame the present, technicals help me manage timing and behaviour, and risk management keeps me alive, but cycles help me think about regime. They help me ask whether the environment is likely to reward mean reversion or trend, whether volatility is likely to stay compressed or reappear, and whether the market is becoming more fragile even as it looks stable on the surface. I cannot know that this year will be more volatile than the last few, but I can say that when multiple cycles overlap — economic, social, geopolitical—the system often becomes less stable and more nonlinear, and that tends to show up as wider swings and sharper repricing.
Behind the paywall, I will discuss a pattern that caught my attention for cycle dynamics this year. They are not “calls,” and they are not predictions dressed up as certainty. They are simply signposts I want on my map, because even if the fog never fully lifts, I would rather know where the cliffs might be than pretend the road is straight.
We will also read some of Macro D’s detailed thoughts on the latest US macro data and his preferred Macro FX trades before we analyse the weekly calendar, look at some interesting chart setups and interpret the output of our weekly asset allocation model.
Let’s go! Have a successful week ahead.
