4 Asset Classes, 1 Economic Regime and a Trade Idea: Leaders vs. Laggards

The process is everything.

If you’ve followed me for a while, you know I repeat myself. A lot. And that’s intentional. The process is the most important part of your trading strategy. I know what I’m going to do every single day. I know exactly what I’m looking for, and I know how volatile each trade I put on can be. No guessing, no winging it.

The first thing I always check? The macro environment. Everything else is secondary. That’s the framework.

2024 was a rollercoaster. The regime model bounced between Goldilocks, Stagflation, and Reflation. It wasn’t clean, and that’s fine. It’s not about chasing every shift in the model, it’s about understanding that markets can trade in multiple environments simultaneously.

Your job is to stay disciplined and take the signals as they come. Don’t overthink it.

Here we are in 2025, and I don’t have a ton of data yet. That’s normal. The year’s just getting started, and the markets will tell us what they want to do.

The key? Stick to the process.

Like always.

The markets don’t owe us anything, but if you follow your system, stay consistent, and trust the signals, you’ll be ready for whatever this year throws at you.

Regime

I think this year is shaping up to look more reflationary. The data for a reflationary environment didn’t start coming through until late 2024, but since then, the probabilities have steadily been increasing.

It’s not necessarily signaling that any one sector will take off, but here’s what I am sure of: the dollar is heading lower, overlooked countries are likely to outperform, and energy commodities have their best chance for a big move since 2020.

Here’s what the environment model is telling us right now:

Inflation is the Main Story

Growth is barely moving, but inflation is rising (on a rate of change basis). That’s the base case for the U.S. economy over the next 3-6 months.

Macro Weather Model Breakdown

For the next three months:

• Commodities: Bullish—there’s strength here.

• Bonds: Flat—not much going on.

• US Dollar: Neutral—nothing dramatic.

• Stocks and Bitcoin: Neutral to slightly bullish—“meh” at best.

What’s the Positioning?

Here’s where different players stand:

• Advisors: Overweight stocks, neutral bonds, underweight cash.

• Speculators: Neutral on stocks, underweight Treasuries, leaning long the Dollar, underweight commodities.

• Systematic Funds: Neutral across the board, not taking big bets.

• Hedge Funds: Tilted toward risk assets, balancing both long and short plays.

Bottom Line

Growth is flat, inflation is rising. Commodities look strong, stocks are just okay, and investors are cautious with a mix of positions.