Dear Investors,
FED Introduction
There’s something about this moment in the markets that feels… contradictory.
You scroll through the headlines, and everything seems okay – growth is holding up, inflation looks tamed, and stocks haven’t crashed.
But when you dig a little deeper, things don’t quite add up.
The data says one thing, sentiment says another, and under the surface, the market is quietly reshuffling the deck.
That’s exactly why I wrote this article.
Not to tell you what to do with your portfolio – but to walk you through what’s going on.
This is a month full of important signals, and I want you to understand them clearly – without needing a PhD in macroeconomics.
As a global macro investor, I believe context beats headlines.
Markets are not static – they move with cycles, surprises, and subtle shifts.
Understanding those movements is what separates noise from opportunity.
So grab a coffee, take a breath, and let’s dive into what matters most right now.
Enjoy the macro FED article
The Data’s Sending Mixed Signals – and That’s a Red Flag
Let’s start with the basics.
The U.S. economy is growing at about 3%, which is solid and above long-term potential growth.
If you only looked at “coincident” indicators like job numbers, retail sales, or GDP, you’d think everything’s moving in the right direction.
And from a short-term perspective, that might be true.
But there’s a growing disconnect. “Leading” indicators – the ones designed to look around the corner – have been falling since early 2022.
These include measures like new manufacturing orders, consumer expectations, and housing permits.
The persistent decline is not normal.
When this divergence occurs, it signals either an overextended economy – or a surprise policy pivot ahead.
Now add the Fed’s stance to the equation.
They’ve held interest rates steady at 4.5%, while inflation has cooled to around 2.3%.
That leaves us with real interest rates sitting around 2.2%, a level that is widely considered restrictive.
In the past, when real rates reached similar levels – think 2006 or 2018 – it preceded economic slowdowns.
Yet, so far, the U.S. economy has been remarkably resilient.
That resilience, though, might be masking fragilities.
As a global macro strategist, I’ve learned that macro imbalances don’t explode – they erode.
And when erosion meets a trigger, that’s when volatility breaks loose.
The fact that coincident and leading indicators have been out of sync for over two years is more than a technical quirk.
It’s a warning shot.
China Looked Like a Disaster – Until It Flipped
Earlier this month, U.S.-China tensions spiked again. New tariffs were announced, and markets reacted instantly.
The MSCI China Index saw a 12.87% single-day crash – its worst performance in over three years.
Then, something unexpected happened.
Within days, both countries reached a 90-day truce.
The U.S. agreed to reduce tariffs from 145% to 30%, while China reciprocated, cutting its own from 125% to 10%.
The market’s response? Relief – followed by cautious optimism.
But what really matters here is China’s next move.
Seven major government agencies launched a sweeping initiative to boost domestic tech.
The plan includes expanded access to credit, relaxed IPO rules, and support for tech-related mergers and acquisitions.
The message from Beijing is clear: if the world closes the door on trade, we’ll open one on innovation.
This is reminiscent of the 2015 pivot, when China responded to capital outflows by championing domestic consumption and infrastructure.
Back then, patient investors who moved into local sectors – like e-commerce and healthcare – were rewarded handsomely.
Today, a similar opportunity is emerging.
While export-heavy sectors remain volatile, areas like green energy, AI infrastructure, and biotech are gaining traction.
If you’re still framing China through the lens of manufacturing and trade surpluses, you’re missing the evolution.
The future of Chinese growth may not be built on exports – but on endogenous innovation.
Global Equities Are Sneaking Ahead – And History Supports It
This might surprise many, but international stocks are up 11.8% so far in 2025.
Meanwhile, the S&P 500 is down 4.9%.
That performance gap is not just unusual – it’s significant.
It marks the third-strongest start to a year for global equities relative to the U.S. since 1986.
When these divergences occur, they often sustain.
In 7 out of 9 years where international markets began the year ahead, they stayed in the lead.
Take 1986 for example: global equities surged 38.4% between January and April, and still added 12.8% by year-end.
The structural backdrop also supports global diversification.
Many developed markets are further along in the disinflation process.
The European Central Bank has already signaled potential cuts. Japan is seeing real wage growth for the first time in years.
Meanwhile, the U.S. is stuck in a policy pause.
Long-term data tells the same story.
In 10-year periods where U.S. equities return less than 6%, international stocks outperformed 96% of the time.
When the U.S. underperforms at 4% or less, that number jumps to 100%.
The takeaway is clear: in a world of shifting cycles, ignoring international exposure is not just a risk – it’s a missed opportunity.
Volatility Isn’t a Warning – It’s a Wake-Up Call – FED
In April, the VIX – the market’s volatility index – rose above 30. For many investors, that number signals fear.
But in my experience, it often signals opportunity.
Since 1990, there have been 32 instances where the VIX topped 30.
In 28 of those, the S&P 500 delivered positive returns over the following year. The average gain?
A robust 24.9%.
History backs this up. During the COVID panic in March 2020, the VIX hit 58.
Over the next 12 months, the market soared 73.9%.
In the 2008 financial crisis, the index touched similar levels – yet those who bought near peak fear saw nearly 10% returns within a year.
What this teaches us is simple: volatility doesn’t just reflect risk – it reflects uncertainty.
And uncertainty breeds mispricing. That’s where opportunity lives.
If your instinct is to retreat when volatility rises, consider the alternative: lean in, adjust your time horizon, and recognize that volatility is often the market’s way of clearing the fog.
The Fed Is Waiting – But That Might Be Good News
Since December 2024, the Federal Reserve has pressed pause on rate changes.
In the months since, U.S. equities have dipped 4.7%, while bonds have quietly gained 3.4%.
Pauses like this don’t last long.
They typically stretch between 3 to 7 months.
What’s more telling is what happens after: once rate cuts resume, the average one-year return is +7.6% for bonds and +23.1% for equities.
This pattern played out in 2003, 2009, and again in 2020.
Monetary pivots often act as accelerators.
The initial market reaction might be muted or even negative – but once clarity returns, asset classes reprice quickly.
What makes this pause unique is the context.
The Fed is pausing not because the economy is weak – but because it’s uncertain. Inflation is low, but labor markets are tight.
Housing is cooling, but consumer demand is stubborn.
These crosswinds give the Fed room to maneuver – but also make it harder to commit.
As investors, our role is to anticipate – not guess. And right now, all signs point to easing ahead.
Cash Feels Safe, But Bonds Are Winning the Race – FED
Let’s talk about the great cash comeback. With short-term yields above 4%, money market funds have become incredibly popular.
Inflows have surged.
You’re still losing ground if you’re standing still.
Between late 2022 and the end of 2024, core bond funds returned 4.6%.
Multi-sector strategies earned 6.3%.
Non-traditional fixed income gained an impressive 7.7%.
Compare that to cash at 4.2%, and the math speaks for itself.
What’s more, the bond market has experienced significant yield swings.
The 10-year U.S. Treasury moved from 5.0% to 3.2%, and recently rebounded to 4.2%.
These shifts created windows for alpha – opportunities that cash simply can’t capture.
So while cash offers stability, bonds offer mobility.
Active fixed income strategies – especially those that adapt to duration and credit dynamics – are proving that safety and returns can coexist.
Alternatives Are No Longer Optional
For most of the past decade, alternatives were viewed as optional – tools for sophisticated portfolios or high-net-worth investors. Not anymore.
During high-rate environments (3%+ Fed Funds sustained over 24 months), alternatives consistently delivered.
Since 1999, global macro strategies have returned 10.5% annually, with much lower volatility than equities.
Market-neutral strategies came in at 8.4%, also outpacing the 6.6% delivered by the S&P 500.
With rate hikes sticking around, the logic behind alternatives becomes undeniable.
They thrive in disruption.
They adapt to policy shifts. They hedge against directional risk.
More importantly, they’re accessible now – through diversified funds, ETFs, and managed platforms.
If your portfolio lacks exposure to strategies like long/short equity, multi-strategy arbitrage, or systematic macro, you may be missing the most stable sources of non-correlated return in the game today.
Politics Are Playing with Perception – and Perception Moves Markets and FED
It’s not just about earnings and interest rates. In 2025, sentiment is deeply politicized – and it’s affecting the market.
A recent University of Michigan survey found that 90% of Democrats are confident in the economy, while only 34% of Republicans share that view.
That’s a 56-point gap.
Even inflation expectations are colored by party lines: Democrats expect 0.4%, while Republicans fear 8.0%.
These aren’t just psychological curiosities.
Sentiment drives flows.
It influences retail behavior. It shapes narrative momentum.
Markets, after all, are not machines.
They’re mirrors.
And right now, that mirror is fractured.
For investors, the job is to step outside the noise and anchor to fundamentals. Bias is the enemy of performance.
What I’m Actually Doing Right Now – FED
If you’re still with me, you’re not looking for hype. You’re looking for signal. And here it is.
The signals today are complex, but not chaotic. Growth is strong, but slowing.
Inflation is under control, but sticky.
Rates are high, but could drop.
Volatility is rising, but so is potential. In short: we’re at a macro crossroads.
I’m not hitting the brakes – but I am turning the wheel:
I’m leaning into global diversification, increasing exposure to undervalued European and Asian markets.
I’m holding high-quality bonds, especially flexible funds with room to pivot duration and credit.
I’m adding alternative strategies to smooth my risk-return profile.
And most of all, I’m staying curious, analytical, and grounded.
This is not a time to fear change. It’s a time to prepare for it.
My Personal Note
If this kind of macro storytelling speaks to you, you’ll love my newsletter, Macro Mornings.
It’s read by over 52,000 global investors each week – people who want more than noise. They want clarity, insight, and strategy.