SI415: Maybe This Is Just What Normal Markets Look Like ft. Alan Dunne

The global macro regime is undergoing a fundamental shift, moving away from the disinflationary environment of the last four decades toward a landscape defined by sticky inflation, rising debt sustainability concerns, and the erosion of institutional norms. Recent US interventions in the yen and bond markets underscore a transition toward fiscal dominance and financial repression, complicating traditional asset allocation. Systematic trend-following strategies have demonstrated resilience in this environment, benefiting from negative correlations with both bonds and equities and the ability to capture idiosyncratic commodity trends. While capital market assumptions from firms like AQR and GMO diverge on long-term equity return expectations, the current higher-interest-rate environment enhances the relative attractiveness of trend-following strategies. These strategies provide essential diversification as traditional 60/40 portfolios face increased risks from correlated asset declines and structural fiscal instability.