Darius Dale recently joined Jack Farley on The Monetary Matters Network to break down why we remain bearish on U.S. equities, cautious on bonds, and are eyeing a short-term bid in Treasurys. If you missed the interview, here are three key takeaways that likely have huge implications for your portfolio:
1) The U.S. Economy Faces a Slower Growth and Higher Inflation Environment
Darius emphasized that tariffs, policy uncertainty, DOGE, and restricting immigration are creating a stagflationary shock. This is pushing growth expectations lower while raising inflation risks. The Trump administration’s economic restructuring plan aims to shift the economy away from deficit-financed consumer spending toward a more balanced, private sector-driven model—but that transition is likely to be turbulent.
Key Takeaway:
Markets may still be underpricing the magnitude of the economic slowdown. A period of slower growth, rising unemployment, and compressed corporate margins could drive a significant repricing of risk assets from here.
2) A Global Debt Refinancing Crunch Remains the Top Risk of 2025
Darius flagged what he calls a “global debt refinancing air pocket” as the number one risk for investors this year. While debt refinancing needs are surging due to the all-time-low-interest-rate borrowing from 2020 rolling over, global liquidity is not keeping pace. This creates a dangerous imbalance that historically leads to severe dislocations in asset markets. Global debt refinancing risk is being exacerbated by the risks we flagged in callout #1 above.
Key Takeaway:
Unless the Federal Reserve intervenes with QE before a crisis hits, financial instability—especially in credit markets—may force a much sharper correction than consensus expects. The Fed’s delayed reaction function adds to the downside risk.
3) Asset Allocation Must Reflect a Wide Distribution of Probable Economic and Policy Outcomes
Darius highlighted that 2025 presents one of the widest distributions of macroeconomic outcomes he’s seen in his career. With meaningful downside risks in the near term, followed by potential tailwinds (tax cuts, deregulation, QE), investors must be prepared for both a deepening crash and a rapid recovery over the next few quarters.
Key Takeaway:
Sticking with a static portfolio strategy may expose investors to unnecessary drawdowns. Systematic risk-managed approaches, like KISS, that dynamically adjust based on volatility and macro signals could be essential in navigating this highly uncertain environment.
Final Thought: Prepare to Risk Manage a Deep “V”
Markets are entering a treacherous phase—caught between slowing growth, rising inflation, and record levels of debt that need refinancing. With tariffs and fiscal retrenchment amplifying downside risks, the Fed may be forced to choose between maintaining inflation credibility or delivering preemptive liquidity support. Meanwhile, the global capital cycle is turning, and U.S. exceptionalism is starting to fray. Investors must recognize that the range of outcomes in 2025 is unusually wide—and incorporating signals from proven risk management overlays is more critical than ever.
If you are not confident your portfolio is positioned correctly for the evolving macro landscape, partner with 42 Macro for data-driven insights and proven risk management overlays—KISS and Dr. Mo—to help you stay on the right side of market risk.
No catch—just real insights to help you stay ahead in the #Team42 community.
Best of luck out there,
— Team 42
