Economy

Our Portfolio Allocation Summary for April 2026.

The current macro environment is a toxic brew of many of the same vulnerabilities that haunted the global economy in the lead-up to past recessions: Rising oil prices, an unsustainable tech capex boom, elevated equity valuations, excessively high homes prices, and brewing stresses in private credit and other parts of the financial system. While global equities look increasingly oversold in the very near term, they will still finish the year below current levels.

Chinese stock prices are converging with economic growth after a 2025 rally. While the country can endure a short-term oil price shock, it remains susceptible to extended supply disruptions and a global slowdown.

The Fed will not cut rates again until core inflation trends lower. This remains likely as the tariff impact on goods inflation wanes, but the recent energy price shock could delay any meaningful downtrend.

The gap between PCE and CPI inflation will narrow within the next few months, mostly driven by core PCE inflation converging toward its trimmed mean.

The spike in oil and gas prices has raised the odds of a global economic downturn. Combined with a more negative signal from our MacroQuant model, this warrants tactically downgrading stocks from neutral to underweight. Looking further ahead, the Iran war will lead to bigger defense budgets and a greater focus on energy self-sufficiency.

The recent oil price shock reinforces our view that inflation will surprise to the upside during the next few months but fall rapidly in H2 2026.

Looking through month-to-month volatility, job growth’s underlying trend is stable and consistent with a flat-to-slightly higher unemployment rate.

Our Portfolio Allocation Summary for March 2026.

Tech companies have historically generated profits from three main sources: 1) economies of scale; 2) network effects; and 3) proprietary technologies. AI threatens to undercut all three sources.