To The Moon

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Back at the start of the year I shared what I thought would be the 10 most important charts to watch for global multi-asset investors in the year ahead. In this note I have updated the charts +provided fresh comments.

1. From Tightening to Tailwinds: despite all the geopolitical events this year, global growth has proven remarkably resilient and thanks to previous monetary stimulus it has been a case of economic reacceleration. But with inflation rising we have seen a clear global policy pivot to interest rate hikes, this will begin to weigh on growth in 2027 as tailwinds turn to headwinds.

“the biggest story in macro of the 2020’s echoes on into 2026, with monetary policy going from tailwind in 2020 to tightening in 2023, and back to tailwinds again now. This is coming at a time where nascent signs are showing an upturn in the macro pulse from previous stagnation (e.g. the global manufacturing PMI pictured below). The path laid out by the monetary policy leading indicator here is a very interesting one indeed, and it’s not the only sign.”

2. Global Growth Reacceleration: the global economic reacceleration is also on display in the OECD leading indicators (with this chart also originally flagging the upturn). Going forward, similar to the above, it’s a bit of mixed signals.

“the OECD leading indicators are also pointing to a major improvement in the global economy; we are going to need to get used to the term “reacceleration” (i.e. a big upturn out of previous slowdown; but not recession). Aside from monetary tailwinds there are several other factors working into this thesis such as fiscal stimulus, thematic capex, inventory cycles, and so-on. But there are a couple of logical flow-on effects we need to watch should this playout as planned.”

3. Inflation Resurgence: inflation has settled into a new higher range and risks heading higher (+staying higher) as inflation expectations get anchored into this new higher range, commodity prices push higher, and global growth remains resilient. Hence the pivot to rate hikes we’ve seen around the world (and most recently from the Fed).

“one key flow-on will almost certainly involve inflation resurgence. We’ve already seen global inflation rates settling into a new higher range and even begin to turn up. Psychologically there’s also going to be a greater sensitivity to any signs of renewed inflationary pressures given what we’ve just gone through in the early-2020’s.”

4. Macro Metals: echoing the stronger growth and general reflationary/expansionary tone, it’s not surprising to see industrial metals pushing higher. A big part of this is the macro story, but also the thematic capex demand aspect (electrification, EV, AI, robotics, geopolitics). For now metals are confirming the strong growth picture, but I’ll be keeping an eye on this one for any early signs of growth sputtering, particularly into 2027.

“this one joins the list of charts to watch in the year ahead once again as it’s going to be a key real-time indicator to track whether the reacceleration and resurgence theme is playing out as planned (i.e. an upside breakout).

And interestingly enough, it’s already made a sharp upside breakout. As noted the other day, base metals are playing catch-up vs monetary metals, and this is as much a positive sign for commodities as it is the global economy.”

5. Cheap vs Expensive: over to markets, stocks and gold remain expensive, the rest of commodities are also heading higher, and bonds are getting cheaper by the day. I think bonds will eventually have their day, but the current moment belongs to commodities (with stocks still hanging in there for now).

“with gold (and stocks) already tracking at expensive levels, the obvious beneficiary from this macro prognosis is going to be cheap commodities. Indeed, if we see global growth reaccelerate and inflation resurgence, commodities are going to be a great hedge against that scenario.

But at the same time, don’t forget about that other cheap diversifier (bonds) in case things don’t quite work out as planned (more on that in a minute: chart 10).”

6. Tail of Two Commodities: on the topic of commodities gold has lost a lot of ground in absolute and relative terms after getting bid up to extreme expensive and stretched levels vs the rest of commodities. Aside from the remaining upside prospects for commodities, the other big theme here is rotation (precious metals having lead the charge initially are now standing aside for the rest of commodities).

In hindsight the wild extremes observed in this chart early this year did indeed act like a rubber band; as I’ve said before, always pay attention to extremes in markets.

“within commodities, as noted, gold has already had a very strong run, and may well continue given the strong monetary tailwinds behind it and strong technical momentum. But this chart shows a sort of stretching of the rubber band as oil lags and gold leads. A strong inflationary upturn is going to boost more cyclical commodities like oil (and may take some steam out of gold).”

7. Emerging Inflection Point: EM Equities made a lot of progress in their big turning point this year, but tactically a few risk flags have seen the medium-term outlook dim (with EM having been swept up in the AI bubble; namely Korea). I’m basically neutral on emerging markets at the moment as many of the previous signals that got me bullish have come full-circle.

“it’s also the type of conditions under which emerging markets and global ex-US equities in general do well. And we’re already witnessing what looks like a major decadal turning point for EM equities.”

8. Generational Shift: US households are running record high allocations to equities (at a time where valuations are also hovering around record highs). This means making further progress to the upside will be harder because it’s hard to see household allocations getting much higher or valuations re-rating much higher either. I think the best case is a new higher plateau.

And the worst case is that a major stockmarket downturn will have a huge adverse wealth effect on the economy with participation levels this high.

“one problem is that US equities are already very richly priced and household allocations to equities are at a record highs. Also consider that this is all heavily concentrated in tech, and it points to one thing…”

9. Dot-Com Echoes: meanwhile looking under the hood of US equities, tech stocks as a group are trading at 20-year high relative valuation premiums, and defensives at 20-year low relative valuation discounts (of course the earnings and thematics justify this for now, but that’s the point; it’s in the price).

This is what you see at the later stages of the cycle.

“with US tech stocks trading at the most expensive relative valuations since the height of the dot com bubble – and defensives trading at the same deep discount, it almost looks too simple... If you want a harbinger chart, if there were ever going to be post-mortem clues that flagged the peak of this market cycle, it’s probably going to be this chart.

While an orderly economic upturn is likely to be supportive, a rapid reacceleration and resurgence in inflation is likely to trigger two things: rotation into beneficiary assets (traditional cyclical stocks, commodities) and out of tech + potentially an upswing in interest rates; which has historically hurt the more long-duration growth-tech stocks.

Hence a rethink on asset allocations is going to be required as the things that worked well in the past few years are unlikely to keep delivering in this type of scenario.”

10. Market Cycle Signal — Bond Market Edition: similarly, investor allocations to bonds are at 20-year lows. Basically everyone wants to own the hot stocks that were yesterday’s winners, and no one wants to own boring defensives or money losing bonds — things that could well be tomorrow’s winners, and with bond yields at decade+ highs, at least you get paid for diversifying these days!

“lastly, this one not only adds to the cautionary tone on the market cycle, but also provides a prompt to have another think on bonds. There’s two ways we can be wrong on that “reacceleration” idea I’ve been going on about: e.g. more of the same middle-porridge (not too hot, not too cold), or: recession.

With bonds trading on cheap valuations and investor allocations to bonds at cycle lows, it makes them a classic contrarian play –not something to forget about (and yes: bonds are still downturn diversifiers). So again, the defensive barbell would be bonds to protect against recession and deflation, vs commodities to protect against a rapid reacceleration and inflation resurgence.

The good thing is we’ll probably get clues along the way, so we can scale-up exposure as evidence unfolds and we build clarity on the next big risks/opportunities.”

Markets are always moving - and sometimes, the best move is knowing what works for you.

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