Happy Friday!

Every week, we dive deep into macro trends, analyze asset movements, and uncover the best value plays in the world of macro. These insights are shared with hedge funds and institutional clients, and each Friday, we bring them directly to you.

While the macro landscape can be complex, we believe it doesn’t have to be intimidating. In this recurring series, we break down the key takeaways from the week ending, explain what we’ve told hedge funds, and outline how we’re trading these ideas—all in a straightforward and actionable way.

This marks the first edition of our weekly portfolio update in the new year, and oh boy, have the tides turned in markets. We have admittedly been utterly wrong in our global bond bet, as it seems like inflation expectations are increasing across the globe, making the rise in both inflation expectations and inflation swaps a global phenomenon rather than a local one—which changes the scenery completely.

We will thus make major changes to the portfolio from the get-go this year. Our models, shared with professional clients (and used in our hedge fund), have flipped net negative on both bonds and equities. This is the direction we lean towards in US markets from the start of the year—with incredible results so far.

The first part of the year will, in our opinion, focus on two things:

1. Getting growth and inflation right in the US.
2. Being right on China, as we are seeing early signs of improvement in that region.

Chart 1.a: The portfolio needs to be geared towards higher inflation      
Chart 1.b: Our models are net short US equities and fixed income