Bulls, Bears, and the One Who Waits
The third animal in the jungle is the one who wins.
“The world breaks everyone, and afterward, many are strong at the broken places.” – Hemingway
That’s how markets feel right now.
We’re coming out of a fractured cycle—pandemic policy shocks, inflationary bursts, a tightening storm—and what’s emerging isn’t weakness, but resilience. Global liquidity is rising. Slowly, quietly, but directionally higher.
That alone creates a floor beneath risk assets. Add in a bearish outlook for the U.S. dollar, and it’s clear: capital is finding a reason to take risk again.
The (long term) U.S. macro regime is less comforting. Growth is cooling while inflation pressures linger—a classic stagflationary backdrop. That’s not the environment where policy leans in. It’s where uncertainty festers. And yet, price is acting like it doesn’t care. The macro model is showing bullish signals across equities, commodities, and Bitcoin. Bonds are a coin toss.
But the dollar? Weak.
And that’s the pressure release valve for the whole machine.
Positioning reflects this tug-of-war.
Positioning: Investment advisors are overweight stocks, underweight cash, and largely indifferent to bonds. Hedge funds have gross exposure leaning long. Systematic strategies are mostly neutral—waiting for confirmation. This isn’t a market pressing full throttle. It’s a market leaning into strength with one hand on the brake.
Valuations suggest optimism. Policy uncertainty says otherwise. The Positioning Model sees a non-trivial risk of a sharp drawdown—what you might call a 1-in-5 chance of a 20% drop. Not because of valuation excess alone, but because fragility still exists beneath the surface.
So what do you do with this?
You respect the trend. You stay with the risk-on regime. But you also prepare for dislocation. This isn’t a time to chase. It’s a time to allocate—strategically, patiently, and with humility.
Because the market may be strong at the broken places, but it’s still recovering.
And the next break won’t send a warning.