Attack the Week (ATW)

March 2, 2025

Sunday Thoughts

I am away in the snow for a week. This is my current macro view (see picture below). The top-down, unfiltered vision often comes to you when you zoom out and reflect. There are so many things happening that it’s hard to put it all into one macro context.

Over the next few days, I will be rethinking the likely paths forward. I will be grappling mostly with the following questions:

• Can we reliably point to where US economic momentum is headed? Atlanta Fed caused some concerts, but all due to inventory build. Front-running tariffs could cause distorted economic realities for a while.

• US stocks seem to be forming a topping process, and the previous engines, especially AI-related stocks, stopped making new highs last year. What does history tell us about forward-looking returns?

• Is the Trumpian confusion and circus really hurting US exceptionalism? The disastrous Zelensky conference should raise quite a few eyebrows everywhere. Are we witnessing a global political shift change?

• DOGE is seemingly wielding the axe around Washington D.C. Will they really make a proper dent in fiscal spending? What if fiscal deficits widen from here, given all of Trump’s tax plans are still ahead? Shouldn’t bonds be more nervous?

• Is inflation as sticky as we think? Where are the risks? Don’t we usually see inflation accelerating just before recessions as companies try to hold their margins just as demand collapses?

• What if we are indeed entering a period of Stagflation? How do you trade this environment? History tells us that it’s destructive for all asset markets. Is the anti-risk parity trade the right expression?

The crisp mountain air will hopefully guide me in having a clear vision and answer some of those questions.

Let’s now read Macro D’s latest thinking before we briefly scan the week’s upcoming calendar. We then revisit some charts, which give us some interesting set-ups. As always, we close with a look at the output of our asset allocation model. Last week, it held allocations to both bonds and equities and returned more that 1%. Let’s see what it decides to do for the upcoming week.

Let’s go!