Executive Summary

• In a blockbuster January, the model delivered +5.6% in a single month at 9.6% annualised vol, with all three themes contributing positively (Fundamental/Technical/Risk Premia). Cross-asset P&L benefited from risk-on, reflation undertones with USD weakness, led by equities (+3.0%), energy (+0.9%) and EM FX (+0.8%). Underperformance in short inflation swaps positions (-0.3%) flagged that Goldilocks is being challenged by market pricing.

• Forward signals stay constructive, led by “re-acceleration clusters”: February’s dashboard still reads decisively risk-on, with equity leadership broadening ex-US into banks/resources and AI-capex beneficiaries, bullish yet differentiated commodities, and FX leaning to weaker USD versus high-carry EM and commodity-beta DM.

• Key risk is hidden factor crowding, so trend gets a bigger seat at the table. Despite apparent diversification, the three themes are increasingly aligned in the same pro-cyclical “long beta / long carry” direction, raising correlation-shock risk. With trend signals improving (and increasingly bearish on rates, challenging the disinflation prior), I am raising trend weight to 55% within technicals as regime insurance - not a philosophical pivot, but a risk-managed response to markets moving ahead of the fundamentals.

Performance Review: A Blockbuster Month

January was an exceptional month for the system: the quant model returned +5.6% with 9.6% annualised vol, which is an exceptionally strong month. All three sleeves fired at once: Fundamental (+5.8%) again led, but Technical (+4.9%) and Risk Premia (+4.4%) were close behind, so the month wasn’t dependent on a single driver.

That alignment is also visible in the longer-run equity curve: the composite’s slope has steepened into 2025/26 as more markets have moved into the same broad regime, and the underlying engines have been compounding in unison rather than taking turns.

Broad Risk Appetite with Reflation Undertones

From a cross-asset lens, the P&L map reflects a blend of risk-on + reflation impulse + USD down scenario. Equities were the dominant contributor (+3.0%), consistent with the broadening equity leadership I’ve been highlighting (value/cyclicals, banks/resources, and AI-capex equities all participating).

The next tier was the selective reflation cluster: Energy (+0.9%) and EM FX (+0.8%), followed by Industrial Metals (+0.4%) and Rates (+0.3%). The drags were concentrated where my framework was leaning against persistence:

Inflation swaps (-0.3%) detracted - a reminder that inflation persistence risk remains non-trivial, and that my Goldilocks base case is not yet being fully validated by market pricing. Agri (-0.2%) and Crypto (-0.1%) were small negatives in an otherwise constructive month.

Trade-Level Attribution: Equity Beta, Oil Products, EM Carry

What makes the attribution cleaner this month is that the positioning data lines up tightly with the winners (exposures are quoted as notional %NAV). On equities, the book was decisively long and tilted ex-US, with the largest index exposures sitting in markets like FTSE 100 (+4.0%), CAC (+3.9%), SMI (+3.7%), and IBEX (+3.6%) - exactly the “cash-generative value + banks/resources” complex that has been trending well.

In energy, most gains came from a long bias in Brent (+1.2%), gasoil (+1.0%), and gasoline (+1.0%), as the market repriced tightness and geopolitical optionality.

In EM FX, the portfolio was positioned for what actually happened: high carry and commodity beta, with meaningful long exposures in TRY (+10.8%), MXN (+5.8%), ZAR (+3.6%), BRL (+3.1%) - a positioning mix that tends to benefit when USD weakens and global risk appetite stays constructive.

No Free Lunch: Inflation Shorts and a Month-End De-Risking

At the same time, January also highlighted the two places where the system is not getting a free lunch. First, the inflation sleeve: the system carried a net short bias across inflation instruments (e.g., USD INFL 2Y (-6.1%) and large shorts across EUR/GBP inflation points), and that detracted as inflation-linked trends stayed firmer than my disinflation narrative would like.

Second, the month ended with a reminder that positioning can unwind violently even inside an uptrend. The late-month profit taking - culminating in the sharp Friday sell-off in precious metals - looked like a classic “crowded risk reduction” episode, amplified by month-end risk reduction and the repricing around the Warsh Fed chair headline.

That’s not a reason to abandon the higher-level themes, but it is a reason to respect volatility: when the tape flushes, my reversal signal may improve at the margin, yet the vol shock typically offsets it via sizing, which is why the model’s net exposure often changes less than the headlines imply.

Hidden Concentration: Three Themes, One Macro Bet

The bigger issue I’m increasingly focused on is underlying factor concentration. On the surface, January looks beautifully diversified - stocks up, oil up, EM FX up, industrial metals up, Japan/Korea rates repricing - and all three strategy groups made money.

But beneath the surface, the exposures show a creeping commonality: Risk Premia is currently aligned with the same “long beta / long carry / pro-cyclical” direction as the alpha sleeves, and in many markets the three engines are effectively expressing similar macro bets through different instruments. That’s a meaningful shift versus large parts of the backtests, where Technical often performed when Fundamental didn’t, and Risk Premia had long stretches of orthogonality (or even negative correlation) to the alpha sleeves.

In some ways, different themes pointing in the same direction gives a sense of a confirmation from multiple lenses and adds to conviction. But since early 2025, that diversification benefit has faded at the margin, and it matters because a correlation shock is exactly what can turn a great month into a sharp drawdown when multiple sleeves are leaning the same way.

With January’s tape as context, let’s turn to what the forward-looking signal stack is now flagging into February across the asset classes.

What My Models Are Saying: One Regime, Many Expressions

Across asset classes, my February dashboard is painting a constructive, late cycle re-acceleration regime. Credit spreads in the US are so tight that the upside is capped even if the economy stays fine, and equity signals point to a broadening beyond US growth into banks, resources, and semiconductors.

In commodities, the tone is bullish but differentiated: oil and refined products are increasingly bullish, metals remain bullish in spite of the selloff, while agris are mostly range-bound with corn and livestock as the bullish outliers.

In FX, the signals are pointing to a weaker USD stance - most clearly versus high-carry EM (MXN/TRY) and commodity-beta (ZAR, AUD, NOK, GBP).

Rates are broadly neutral to mildly bearish, with the sharpest bearish impulse still in Japan/Korea. The US is more conflicted, with Treasury technicals turning increasingly bearish, but the fundamental case for higher yields still needing a clearer catalyst.

Against that backdrop, my model is leaning into the strongest clusters, but sizing remains disciplined given elevated cross-asset correlation and volatility.

Equities: Old Economy Strength Meets New Economy Momentum

My equity signals stay net bullish overall, with interesting differentiation between the regions and sectors. The fundamental macro signals are particularly strong in the US, while the cleaner technical impulse is increasingly ex-US - several cyclical, value-tilted markets have better trend quality than US growth.

That’s most obvious in the resource- and bank-heavy indices like the FTSE 100, Ibovespa, and IBEX. Inflation has been stickier in 2020s compared to 2010s-style disinflation, commodities seem to be returning to their bullish trend, and the market keeps rewarding cash-generative value. Banks benefit from (i) healthy net interest margins, (ii) contained credit stress, and (iii) capital return (dividends/buybacks) as earnings stay resilient. Spanish banks’ growing index weight is part of that story.

On the growth side, TAIEX remains one of the cleanest “AI capex” expressions. Taiwan is extraordinarily tech-concentrated (c. 84%), with the foundry/ASIC supply chain at the centre of the current data-centre build-out.

The weak spots are also intuitive. India has been pressured by FX weakness and foreign outflows, which is consistent with the softer technical read-through. Indonesia’s technical damage looks event-driven: the late-January drawdown followed MSCI’s inevitability warning and downgrade risk. Worth noting my model already had Indonesia at a weak/neutral composite in last month quant playbook A Disinflationary Finale.

Finally, South Africa (JSE 40) cooling at the margin from very bullish to bullish is consistent with the recent volatility burst: the bulk of the strength for this market has shifted from fundamental to technical signals (which have a smaller weight), and my risk-premia sleeve tends to soften with parabolic moves, mechanically leaning against “max trend” exposures.

Overall, my global equity dashboard still reads decisively risk-on: the US continues to provide the fundamental anchor, while trend quality is arguably cleaner outside the US, where value-tilted, cyclical indices.

Between resource and bank-heavy markets, and AI capex beneficiaries, the composite is being supported by multiple, distinct engines rather than one narrow factor. Pockets of EM fragility are worth noting (India/Indonesia), but at the balance of evidence still points to a market that wants to grind higher, not roll over.

Credit: Tight Spreads Anchor the Upside

In US credit my composite has now fallen to neutral both for IG and HY. Trend has been constructive and my risk-premia sleeve is still bullish, but spreads have tightened to historically low levels, normally seen around cyclical highs / late-cycle complacency. This makes the upside from “more compression” mathematically small versus the downside if growth, liquidity, or geopolitics wobble.

The market is effectively pricing a near-perfect credit path - fine if nothing breaks, but negative convexity in the spread product itself. That’s why I can be comfortable being more bullish in equities (where upside can come through earnings growth, multiple expansion, or sector rotation) while keeping credit, especially in the US, closer to neutral.

Energy: Oil/Products Lead the Re-Acceleration Cluster

Energy signals also form one of the “re-acceleration” clusters in my dashboard, led by oil and the refined products complex (gasoline / heating oil / gasoil). The common thread is that the market is paying for tightness and geopolitical optionality: crude benchmarks have been hovering near multi-month highs as US-Iran tensions re-price the tails. A number of analysts have highlighted how sanctions and geopolitical frictions can tighten distillate balances, lift cracks and make “products over crude” the higher-signal expression.

Venezuela is directionally bullish for supply, but it’s a slow variable: even with policy relief, production recovery is constrained by infrastructure, investment, and institutional bottlenecks.

On demand, the “AI build-out” story matters more cleanly for power and natural gas than for crude, but it reinforces the broader capex/industrial cycle that typically supports the whole energy complex at the margin (construction, petrochem inputs, diesel intensity). The IEA explicitly frames data centres/AI as a material incremental load on electricity systems.

Net: my signals are saying the upside is currently clearest in oil and its derivatives. Geopolitics are seemingly acting as a persistent volatility bid rather than a one-off headline.

Industrial & Precious Metals: Still Bullish, but Narrower Breadth

Gold remains the standout within the precious complex, with supportive signals both from the fundamental and technical aspects. Silver was neutral last month and remains neutral in this edition.

By contrast, industrial metals are carrying a more consistent composite right now (especially copper/aluminium), which fits the broader re-industrialisation / grid / capex build-out regime: the signal leadership is coming from markets where the macro impulse and trend are reinforcing each other rather than fighting.

The main update within precious is what happened on Friday: the abrupt sell-off in both gold and silver has nudged my reversal signal higher at the margin (fast downside moves tend to mean-revert, so the model starts to see a slightly better asymmetry than it did before the flush). You can see that in the recent uptick in the “Reversals” line below.

However, that marginal improvement is largely offset by the volatility shock. Sizing in my model increases with signal strength but falls with risk, the spike in realised/implicit volatility means the actual exposure changes very little even if the reversal component improves.

I’m still constructive on the metals theme, but industrial metals look cleaner, while silver remains a neutral hold rather than an aggressive add.

Agriculture: Neutral with outliers in corn and livestock

In agriculture, the overall tone is broadly neutral, largely due to weak fundamentals across the grains/softs complex - consistent with an environment where supply/weather headlines are noisy and positioning gets frequently reset.

One of the outliers is corn, where the market is getting a more coherent demand story: incremental ethanol pull (especially in Brazil) is tightening the medium-term balance sheet, and recent South American weather risk keeps a bid under the curve.

The other bright spot is livestock, where fundamentals are simply tighter: US cattle supplies remain historically constrained and wholesale/retail pricing power is still strong, which keeps both live cattle and related products supported even when broader ag sentiment is messy.

Against that, I’m less willing to lean into coffee right now - while the fundamental narrative can still sound constructive, the lack of technical confirmation is the type of divergence I would treat as a warning flag.

FX: USD growing incrementally weaker

FX is now starting to gradually validate the “USD down” regime. The dollar has broken lower, but with elevated volatility, which means my model is more cautious on sizing even when the directional signal turns. The most negative USD read-through is versus high-carry / high-real-rate EM and commodity-linked FX - reflecting a mix of weaker USD, high risk appetite, and terms-of-trade focus.

• In MXN, the support is still fundamentally carry: Bank of Mexico (Banxico) is expected to keep the policy rate around 7% in Q1 2026 (with only gradual easing thereafter), keeping rate differentials attractive and making MXN one of the cleaner expressions of “positive carry with improving risk sentiment.”

• TRY screens well on carry too - policy rates remain extremely high (even after recent cuts), so the currency stays in the “high carry, high volatility” bucket where returns can look attractive.

• In ZAR, the story is more explicitly commodity-beta: the rand has been buoyed by surging precious metals (gold in particular) plus a modest improvement in domestic sentiment.

In DM, the relative winners are consistent with the same regime logic.

• AUD is being supported by a mix of improved risk tone and a repricing of Reserve Bank of Australia policy expectations after firmer domestic data.

• GBP has been firmer on the back of stronger UK data/inflation prints (less urgency to ease) alongside a softer dollar backdrop.

• NOK is the “energy proxy” in G10. When the oil complex is bid, NOK typically benefits via terms-of-trade and flow dynamics, which is what we are seeing today.

Among cryptocurrencies, Bitcoin should very much be participating in the broader “dollar debasement” trade, but technicals remain weak, and this week’s selloff was not helpful. The upside is there, as indicated by the composite score, but the timing the catalysts appears increasingly difficult.

Rates: Bearish outliers in North Asia spilling into the US

Globally, my rates dashboard is neutral to marginally bearish, with the bearish impulse still concentrated in North Asia. Japan and Korea have spent decades anchored in a low-inflation / quasi-deflation equilibrium, so the market’s starting point for inflation expectations, term premium, and positioning is still heavily “old-world”.

In that setup, even a modest drift toward stickier wage/price dynamics can force an outsized repricing because the baseline is so compressed. The potential asymmetry is in the direction of higher yields and steeper term premium, not because inflation is about to explode, but because the prior was set too low for too long, as I discussed in North Asia Reflation Watch: Small Shifts, Big Moves.

The US is more nuanced. Technical weakness is emerging in Treasuries, but the fundamental engine is not yet as compelling. Inflation surprises have been consistently negative, which argues against leaning hard into bearish rates view without a clearer catalyst.

I’d like to see a more durable fundamental signal - either from re-tightening of financial conditions, or a renewed inflation impulse, before I treat the US as the next leg of the “bearish global rates” trade rather than a tactical wobble inside a still-disinflationary backdrop.

Inflation Swaps: Challenges to Goldilocks thesis

Inflation swap markets are not fully validating my US disinflation / Goldilocks base case. The USD inflation curve (especially 5–10Y) still carries a firmer trend profile, which aligns with the bearish technical tone in nominal Treasuries from the prior section.

This is therefore something I’m watching closely. While my fundamental bias remains disinflationary, I closed my long US rates positions a while ago and I’m reluctant to re-establish them while the trend is still moving against my conviction.

Is Trend on the Cusp of Revival?

Since the Liberation Day selloff, a surprisingly large share of realised returns across my book has come from simple price persistence - the kind of old-school, multi-asset trend that CTAs are built to monetise.

I am paying close attention to this because fundamentals still dominate in my process (50% of the composite signals), with technicals at 30% and risk premia at 20%… and “trend” is only one component inside the technical sleeve, currently at 45% of technical theme, or 13.5% overall.

Trend is the most “obvious” part of systematic trading: it’s old, widely-known, and often derided as decayed. But it’s also one of the few effects with deep empirical roots across asset classes and long histories.

The most important aspect of this is that when regimes evolve, price often moves before the macro narrative catches up. If 2026 is transitioning from “Goldilocks disinflation” into something more reflationary, trend is the type of signal that can pull me into the right exposures early, even when my fundamental priors lag.

Why trend may be re-accelerating

The obvious objection is whipsaw: trend can look brilliant right up until it doesn’t. So the key question I’ve been asking is not “is trend good?” but “is trend exhausted?” Looking at the performance of my two largest trend-heavy technical sleeves, I don’t think so. If anything, trend looks like it is still emerging from a prolonged drawdown, rather than rolling over from an overheated peak.

This “coming back to life” framing in my tracker is consistent with what broader industry benchmarks have been documenting: the SG Trend Index (a widely used proxy for the largest trend-following CTAs) has experienced meaningful drawdown windows in recent years, followed by recoveries that can re-assert quickly when dispersion and persistent trends return.

Rates: Where the Signal Conflict Matters Most

This matters most where trend disagrees with my fundamental framework. The cleanest example is rates. My fundamental lens remains broadly disinflationary / neutral on US duration, and I’ve been explicit that I want clearer catalysts before leaning aggressively short Treasuries. Yet the technical layer is becoming more consistently bearish on nominal rates, and the inflation-linked tape has been less cooperative with my Goldilocks thesis than I’d like.

I don’t treat that as a reason to abandon fundamentals; I treat it as a reason to lower my certainty and let price do more of the talking. Trend is, in a sense, an early-warning system: it doesn’t tell me why yields are rising, but it can tell me that the market is starting to price a different distribution.

If reflationary forces aren’t as narrow as I believe they are, and commodity strength feeds into realised inflation, if term premia re-awaken, if regimes shift - trend has historically behaved like “crisis alpha”.

Trend as Regime Insurance

This is the practical reason I’ve decided to listen more. At the end of June 2025, I increased the trend component from 25% to 45% within my technical sleeve, and I’m now lifting it again to 55% starting from tomorrow’s close. I’m doing that because the market is increasingly behaving like a trend market: prices are leading narratives, cross-asset moves are becoming more coherent, and the “trend cluster” is broadening from the earlier precious-led phase into industrial metals, energy, and now rates.

If trend is truly dead, it can indeed mean-revert fast and punish late adopters. But if it’s re-entering a 2022-style environment, where persistent moves can dominate returns, then it can also override my slower-moving disinflation priors, especially in rates.

For clarity, I’m not making a philosophical switch from fundamentals to charts. I’m adapting weights because, right now, my risks are starting to look concentrated across the three themes, and price momentum may be doing a better job of anticipating what the fundamentals might look like in three to six months.

Disclaimer

Convexta does not provide dealing, solicitation, or advisory services in futures or securities, and does not offer asset management services. All publications are made available to the public. Authors’ personal allocations and opinions are provided for educational purposes only, are not tailored to any specific reader, and do not constitute investment advice.

Executive Summary

• December finished strongly for my quant strategy. The model returned +3.5% in December, with 6.3% annualised volatility, led by the Technical theme, with Fundamental and Risk Premia themes also positive.

• Returns were driven mainly by long equities (+1.8%) and metals (+1.4%), with help from selective EM FX positions (+0.4%) and credit (+0.2%).

• Signals still point to a growth-dominated regime with falling inflation rates, with remaining reflationary forces narrowing into metals and Japan/Korea rates.

• My quant model keeps its pro-risk positioning for now, ready to rotate into more macro-sensitive markets if a policy or growth shock creates the next big dislocation.

Performance Review: A Strong December Driven by Equities and Metals

My composite quant model returned +3.5% during December 2025, with annualised volatility of 6.3%. Fundamental theme returned +2.9%, Technical theme was the top performer with +3.7%, while Risk Premia theme returned +2.8%.

Overall, December was a very strong month in which the long exposures to equity markets, precious and industrial metals were the largest contributors to returns (+1.8%, +0.8% and +0.6%, respectively). Additional contributors included the carry-biased positions in EM FX (+0.4%) and long exposures to credit spreads (+0.2%). Short positions in inflation swaps and Japanese rates added further to total portfolio returns.

Minor losses came from DM FX (-0.2%) where anticipated USD strength failed to materialise and the signals moved back towards neutral positions into the year-end. Small losses were also posted in Agricultural markets (-0.1%), where sustained trends or reversal-like moves have been largely absent into the year end.

Market Backdrop: December’s Disinflationary Finale

The key macro anchor was monetary policy. The Fed delivered a 25bp cut in December, taking the policy rate to 3.50% - 3.75%, paired it with a cautious message on the pace of further easing.

Importantly, disinflation surprises across several Western economies helped keep the easing narrative alive into 2026. U.S. CPI for November slowed to 2.7% y/y and came in significantly below expectations (with additional uncertainty created by the government shutdown’s disruption, as discussed in The CPI Files: The Truth Is Out There). The UK printed a sharper-than-forecast drop to 3.2%, and Canada and the Eurozone also undershot consensus, with their inflation rates printing close to the 2% mark.

In the U.S., equity performance was largely flat on the month. The Dow added about +0.7%, the S&P 500 finished broadly flat, and the Nasdaq gained roughly +0.5%. Outside the U.S., developed-market equities were steadier, with the UK’s FTSE 100 getting a strong year-end bid supported by financials and miners. Emerging markets entered December with strong 2025 momentum and held up into the Fed decision.

In commodities, precious metals extended their bullish upswing. Gold prices rose roughly +2.0% in December, while silver surged about +27% over the same window. Industrial metals stayed volatile but strong, with copper pressing toward record levels on supply tightness and structural-deficit narratives heading into 2026.

Quant Signals: Broad Growth Bias, Sector-Specific Reflation

The composite signal set in my systematic framework (Fundamental 50%, Technical 30%, Risk Premia 20%) continues to point to a bullish global macro backdrop. The overall configuration of signals remains consistent with a growth-dominated environment, where risk-taking in equities and credit continues to be rewarded. While the broad macro tone is disinflationary, a reflationary undercurrent persists in selected sectors - notably industrial and precious metals, and in Japanese and Korean rates.

Pure “macro” markets such as currencies and sovereign rates remain largely directionless, with isolated exceptions in EM FX. Opportunities in FX and rates usually re-emerge when complacency in equities and credit is disrupted by a policy or growth shock. For now, no such inflection point is visible.

Equities: U.S. Breadth Returns Beyond the Mega-Caps

Equity signals improved compared to last month, with more bullish readings across the board. U.S. signals improved the most, particularly technical signals across Russell 2000, S&P 500 and DJIA. Nasdaq technicals remain in the neutral zone, but the bullish fundamental score for the Nasdaq strengthened further. Nasdaq’s fundamental improvement slightly complicates last month’s ‘broadening’ thesis across regions, though the Russell 2000 strength supports broadening by size.

The bullish outliers at this time are the Swiss SMI futures which broke to new all-time highs during December, and the South African JSE40 Index, which has a large exposure to gold and platinum group metals miners.

While two out of 31 markets under coverage are showing negative technical signals, none are showing bearish composite readings, which is a significant confirmation signal for the continued bullish outlook on equities.

Credit: Stability Returns After November’s Wobble

After November’s wobble, credit signals have returned to broadly positive territory across all key markets. U.S. High yield remains neutral, and U.S. Investment Grade is positive mainly due to the risk-premia angle, rather than current fundamental or technical strength which are lacking at this time.

Credit spreads remain tight, with limited room for further compression. Credit spread dynamics appear the most attractive in Europe, where technical signals have strengthened compared to November.

Energy: Signals Drift Toward Neutral

The shift in signals from moderately bullish to neutral continues across the crude and refined product complex. In November, the deterioration was driven mainly by weaker macro fundamentals. In December, most of the incremental weakness came from softer technicals.

A notable exception appears in EU Carbon, where the composite turned bullish from neutral a month ago and remains strong, supported by sustained price momentum and falling volatility since March 2025.

Metals: Bullish Structure Remains Intact

Industrial metals continue to strengthen, with fundamental signals improving for Aluminium, Zinc and Copper during December. High-Grade Copper (COMEX) continues to look very attractive, as the reversal signal from Summer’s tariff-related collapse remains strongly positive due to the very gradual return back towards the all-time highs. Furthermore, trend signal strengthened during December, and remains at levels where CTAs will continue to add to positions on further strength (i.e. not overstretched).

In the precious metals complex, there has been some deterioration in Silver during December. First, the overall trend signal has weakened marginally with increasing volatility. But more notably, the bullish reversal impulse that followed the sharp selloff in late March / Early April 2025 has been sliding back towards zero at an increasing rate in December.

Agriculture: Select Pockets of Strength

Agricultural commodities remain broadly neutral. Grains and softs continue to trade without a clear macro driver, consistent with ample global supply and indecisive price action.

The trend signal for coffee has deteriorated materially in December, and the overall technical outlook is now at neutral levels. In contrast, trend signals have improved during December for livestock, with bullish curve-based signals adding further strength to the composite signal for these markets.

FX: Directionless Core, Selective Carry Opportunities

Composite FX signals remain largely neutral across key DM currencies, with GBP being the exception with a mild bullish bias relative to USD. The composite signal for Sterling has strengthened mainly on improving technicals, with unanticipated strength in GBP and FTSE 100 during December leading to an improvement in trend readings for UK assets.

In emerging markets, high-carry currencies such as TRY, MXN, and ZAR continue to register moderate positive signals, consistent with a constructive global risk backdrop.

In contrast, TWD continues to show a degree of weakness, reflecting deflationary tendencies. In contrast, the KRW remains at neutral levels, recently reinforced by BoK’s FX intervention to stabilise the currency.

The technical picture for crypto assets remains bearish, and the composite signal is neutral. The continued weakness has reinforced negative trend signals, with no meaningful indications of near-term bullish reversal.

Rates: Broadly Neutral, Bearish Outliers in Japan/Korea

Rates signals remain mixed and broadly directionless. On the composite basis, most signals are neutral. Moderately bearish readings are observed in Japan and South Korea, implying an upward pressure on yields particularly at the long end of the curve.

On the fundamental front, the positive growth pulse (bearish for rates) is fully offset by the negative inflation pulse (bullish for rates), leading to an overall neutral reading from the pure macroeconomic mix.

One exception is Korea, where CPI has unexpectedly pushed above the 2% y/y target during Q4 2024. Together with stronger than expected GDP releases in second half of 2025, the overall signal is moderately bearish for rates and fixed income.

Technical signals are firmly bearish in Japan and Australia, moderately bearish in Korea, Scandinavia and Switzerland, moderately bullish in the UK and the short end of the Canadian yield curve, and neutral in most of the remaining markets.

Overall, bearish signals in Japanese and Korean long end are the only meaningful readings at this time.

Inflation Swaps: Bearish Drift

Inflation markets have moved a notch from firmly neutral to slightly bearish. The two-year inflation swap rate in the U.S. continued its slide during December, challenging the broad reflationary narrative.

This evolution confirms my thesis that inflation rate in macroeconomic sense is falling, in spite of pockets of targeted reflationary readings in metals, Japan and now Korea. Fundamental readings are mostly neutral, reflecting resilient economic activity, but these are offset by increasingly bearish technicals.

Positioning: Pro-Risk Tilt Led by Equities and Metals

At the time of writing, the portfolio’s exposure profile continues to show a blend of carry and pro-growth positioning:

• In equities, the long exposure set remained diversified across major indices, with strength broadening into Russell 2000 for the first time in long time. The tilt toward markets benefiting from metals and mining is visible in positioning, in line with the signal configuration outlined in the above section. The total notional exposure to equities is 71% of NAV, with volatility contribution sitting at 7%.

• In commodities, key long positions are in precious and industrial metals, driven by positive economic growth pulse and strong trend signals driven by rising industrial and investment demand. Total net exposure to metals is c. 14%, with 1.5% volatility contribution.

• On the credit side, some of the largest notional allocations are in in Europe, Japan, Australia, and North American IG markets. This is consistent with a carry-oriented stance that benefits modestly when yields are stable and spreads remain contained.

• In FX, the strategy maintained meaningful long exposures to selected EM and high-carry currencies such as TRY, MXN, ZAR and BRL while running smaller short positions in lower-yielders and currencies associated with looser policy stances (e.g. CNH, TWD). Within DM, the model is +21% net long USD, which results in a negative volatility contribution of -0.3%.

• In rates, net positions are very close to zero due to offsetting positions between small longs and shorts. The volatility contribution is +0.2%, mostly driven by shorts in JPY and KRW rates.

Outlook: Risk Still Rewarded, Macro Shorts Not Yet Here

On a notional/NAV basis, the quant model still conveys a confident and diversified pro-risk stance, via long positions in equity and credit risk complemented by small selective positions in rates and FX.

I’m comfortable keeping the book bullish equities and long metals because my signal ensemble still describes a growth-dominated, risk-rewarding regime: equity leadership has broadened beyond a few crowded winners, credit remains supportive, and the “reflation” impulse hasn’t vanished - it’s simply narrowed into industrial and precious metals and Japan/Korea rather than showing up as a broad inflation trade.

At the same time, FX and core rates are still largely directionless, which is typical in the “equity-and-credit phase”. The big asymmetric macro trades usually appear later, when a policy shift or growth shock creates dislocation.

As discussed in Druckenmiller’s Playbook in a Reflation Hangover, the stance is to ride what’s working now, keep risk measured, and stay ready to rotate aggressively when macro dislocations finally reprice the FX/rates complex.

Disclaimer

We do not provide dealing, solicitation, or advisory services in futures or securities, and we do not offer asset management services. All our publications are made available to the public. Authors’ personal allocations and opinions are provided for educational purposes only, are not tailored to any specific reader, and do not constitute investment advice.

Equities and credit remain the clearest beneficiaries, with leadership rotating away from last month’s concentrated pockets like semiconductors, resource markets, and trade war beneficiaries, toward a more distributed, healthier breadth across regions. The reflation theme, by contrast, has become more selective: industrial and precious metals still screen strongly, but energy has turned neutral and broader inflation-linked assets have lost momentum. What remains of reflation now lives mainly in metals and Japan, rather than in a broad cross-asset picture.

“Pure macro” markets, like FX and rates, are still directionless aside from a few policy-driven outliers like JPY and TRY. This is typical of late-cycle regimes: the asymmetric macro trades usually emerge after the equity-and-credit phase matures. For now, nothing in the signals suggests an imminent macro inflection.

Against this backdrop, the Composite Systematic Macro Strategy delivered +0.7% in November, led by equities, EM FX, and precious metals, with offsets from energy, agriculture and crypto. Technical models outperformed, fundamentals followed, and risk premia lagged - exactly the pattern you’d expect in a choppy, rotational risk-on tape.

The result is a broad and confident pro-growth stance: long equities, long credit, constructive metals, and largely neutral in rates, FX and inflation swaps. It’s also the kind of environment where Druckenmiller’s opportunistic approach applies cleanly: ride the growth phase while it pays and stay ready for the moment when contrarian macro-opportunities reappear.

Quant Signals: Growth Bias Broadens While Reflation Theme Narrows

The composite signal set in my systematic framework (Fundamental 50%, Technical 30%, Risk Premia 20%) continues to point to a bullish global macro backdrop, with some rotation beneath the surface.

The overall configuration of signals remains consistent with a growth-dominated environment, where risk-taking in equities and credit continues to be rewarded. A reflationary undercurrent persists in selected sectors - notably industrial and precious metals, and in Japanese rates and FX markets - but momentum has cooled slightly relative to the autumn peak.

Pure “macro” markets such as currencies and sovereign rates remain stubbornly directionless, with isolated exceptions like the yen and Turkish lira showing policy-driven trends. This lack of broad directionality is typical for late-cycle phases: opportunities in FX and rates usually re-emerge when complacency in equities and credit is disrupted by a policy or growth shock. For now, no such inflection is visible.

Equities: A Broadening Upside

Equity signals have moderated from last month’s pockets of exceptional bullishness but remain consistently positive across the majority of markets under coverage. The composite readings are no longer dominated by a handful of standout leaders - such as semiconductors (Taiwan), global trade rebalancing beneficiaries (Singapore), or resource-and-mining-heavy indices (JSE 40) - but instead reflect a broad, steady bullish bias across both developed and emerging markets.

Importantly, not a single market currently registers a fully bullish composite, which marks a shift from the stronger, more concentrated breadth observed a month ago. This suggests that the leadership phase driven by the early AI hardware cycle and resource-linked momentum may be giving way to a more distributed, multi-sector advance, where contributions are more evenly spread across regions, industries and styles.

This soft rotation is consistent with a “broadening” equity theme: as the front-loaded gains in semiconductors and mining ease, the next leg of the cycle appears to hinge on downstream AI adoption, an expansion into software and services, and a stabilising backdrop for global trade. Incremental progress in U.S.-China negotiations has reduced some of the tail risk that previously supported re-shoring and resource-exposed markets, contributing to the current moderation in relative performance.

Overall, the composite signal set still points to a constructive equity environment, but with a more evenly distributed opportunity set compared with last month’s concentrated leadership.

Credit: Momentum Slows, Still Marginally Positive

Credit signals have moderated from strongly bullish to modestly positive, driven primarily by weakening fundamentals. The remaining strength largely reflects persistent positive inputs from the Technical and Risk Premia components rather than fresh fundamental catalysts. Credit spreads remain tight, with limited room for further compression. Europe, Japan and Australia are the regions where credit spread dynamics appear the most attractive from a risk-taking perspective.

Energy: Fundamentals Weaken, Composite Turns Neutral

Energy signals have shifted from moderately bullish to neutral across the crude and refined product complex, mainly driven by weaker macro fundamentals. Only ICE Gasoil futures retain a positive composite reading. Natural Gas remains volatile but directionally neutral across all three major hubs: Louisiana (HH), UK (NBP), and the Netherlands (TTF).

A notable exception appears in EU Carbon, where the composite has turned bullish from neutral, supported by sustained price momentum and recent technical breakout of EUA futures above €80.

Industrial & Precious Metals: Still Bullish, but Narrower Breadth

Industrial metals remain constructively bullish, albeit with slightly narrower breadth than in November. Strength is now concentrated in aluminium, zinc, and COMEX copper which is again starting to trade at a premium to LME copper following the August tariff shock.

Precious metals retain an overall bullish tone, led by gold and silver, while palladium has softened as structural headwinds from the combustion-engine sector continue to weigh on sentiment.

Agriculture: Neutral with Fading Idiosyncratic Strength

Agricultural commodities remain broadly neutral. The previous pockets of strength in coffee and livestock have moderated but not disappeared entirely. Grains and softs continue to trade without a clear macro driver, consistent with ample global supply and an uninspiring technical picture.

FX: USD Range-Bound, EM Carry Still Attractive

FX signals are broadly unchanged from last month. The U.S. dollar remains range-bound against most majors, with GBP maintaining a mild bullish bias. The composite signal for Sterling has weakened however, as previously expected policy firmness has not materialised and technicals have also somewhat deteriorated.

Among emerging markets, high-carry currencies such as TRY, MXN, and ZAR continue to register moderate positive signals, consistent with a constructive global risk backdrop.

By contrast, East Asian currencies (TWD, JPY) show a degree of weakness, reflecting deflationary tendencies and policy divergence from the Federal Reserve. The fundamental KRW signal has turned neutral, however, following the BoK’s signal that the easing cycle has likely ended and that KRW weakness has reached a “concerning level” (discussed in my Weekly Macro Playbook from 17 November).

Finally, crypto signals have returned to neutral, following a very steep decline and weakening technical picture.

Rates: Neutral Overall, Japan and Korea Still Bearish Outliers

Rates signals are largely unchanged and stubbornly directionless. Most developed-market signals are in the neutral zone. Japan continues to stand out with persistently bearish rate signals across maturities, pointing to gradual policy normalization and upward pressure on yields, particularly at the long end of the curve. Korea exhibits a similar, though less pronounced, pattern of slight bearishness.

Inflation Swaps: Weak Technicals Dominate the Neutral Composite

Inflation-linked markets remain firmly neutral. Fundamental readings are modestly bullish, reflecting resilient real activity, but these are offset by bearish technicals that continue to point to limited momentum. US inflation breakevens drifted lower in November, challenging the broad reflationary narrative.

Summary

Overall, the breadth of signals across the framework remains stable and broadly constructive. The absence of clear stress signals in FX and rates, combined with continued pro-cyclical strength in equities, credit, and key commodity sectors, suggests that the global risk cycle is still intact. Within equities, the shift from concentrated leadership toward a more broadly distributed advance reinforces this view, indicating a healthier and more sustainable phase of the cycle. The reflation pulse has softened at the margin and now requires greater selectivity, but there is still little evidence of the type of macro instability that typically precedes a sharp reversal. For now, the systematic signal set continues to favour measured risk-taking into year-end.

Aren’t Macro Investors Perma-bears? The Druckenmiller Principle

The Misconception About Global Macro

In certain institutional circles, there is a perception that macro portfolio managers should focus almost exclusively on rates, FX, and volatility markets, and that they are at their best during periods of market stress. Institutional allocators often reinforce this view by treating macro as an uncorrelated crisis hedge to equity-heavy portfolios. As a result, macro hedge funds are frequently forgiven for sluggish performance during equity bull markets, so long as they deliver when conditions deteriorate. But it doesn’t have to be this way.

Legendary macro investor Stan Druckenmiller has often explained that while his biggest returns came during major macro dislocations in rates, FX, and commodities, he has no hesitation about being long equities when the market is trending higher. In a well-known interview, he said:

“I focus on what’s moving. I don’t care what asset class it’s in.”

Opportunistic Macro Framework

Druckenmiller’s process is opportunistic:

• In stable or expanding growth regimes, he is fully engaged in equities.

• When the macro regime breaks, the opportunity set shifts into rates, FX, and commodities, and he rotates aggressively.

This is his core principle: extract returns from equities when they are working, but stay ready to strike when the big macro trades appear. This philosophy maps cleanly onto the behaviour of my systematic signals today. The composite signal set is bullish across global equities, and macro markets like rates, FX, and inflation swaps remain directionless. In other words, this is precisely the configuration where Druckenmiller would be comfortable carrying equity risk.

Equally important, nothing in my framework forces me into equities structurally. As I showed in my previous Monthly Quant Playbook, there have been long stretches where the strategy was dominated by short-duration trades, long positions in inflation swaps, or short positions in equity markets. For a more complete picture, below is the historical evolution of the average signal across all commodities and currencies (vs USD), with the cross-sectional 2-standard deviation bands around them to show the dispersion of signals.

The system rotates across asset classes whenever the signal environment justifies it - and only then. Today, the edge happens to sit squarely in equities and credit, while macro markets wait for a catalyst.

The table above shows the aggregate snapshot of positions in the Composite Systematic Macro Strategy, derived from the signals shown above and my current risk model. The overall strategy targets 10% volatility, and the largest position (in terms of risk contribution) is the 69% net long exposure to Equities, followed by Metals (14% long) and Credit (58% long). For an educational piece about how to read and interpret my allocation tables, please refer to my recent piece Asset Allocation is Dead. Long Live Asset Allocation!

An Unconstrained Macro Process

This is precisely how an unconstrained macro process should function: participate in the bull market when the signal environment supports it, but remain vigilant for the moment the opportunity set pivots toward macro dislocation. There is no contradiction in being long equities even if you’re a macro investor. The real mistake would be ignoring where the edge currently is.

As long as the signal ensemble remains stable and pro-cyclical, the most Druckenmiller-consistent stance is exactly the one suggested by the model:
measured, risk-aware bullishness, with readiness to rotate the moment the cross-asset opportunity set shifts.

Performance Review for Nov 2025: A Decent Gain in a Volatile Tape

The Composite Strategy returned +0.7% over the 31 October–28 November window, with annualised volatility around 10.1%. Fundamental models added roughly +0.5%, Technical models outperformed with about +0.9%, while Risk Premia strategies detracted around -0.4%. Overall, it was a month of grinding, uneven progress rather than a clean beta grab: gains in equities, EM FX and precious metals were partly offset by weakness in energy, agriculture and crypto.

Market Backdrop: A Roller Coaster November

Globally, November was characterised by choppy risk sentiment. U.S. equities sold off early in the month on concerns over stretched AI and mega-cap valuations, with some commentators briefly calling it the worst November since the GFC, before a powerful rebound into Thanksgiving week reversed much of the damage. By 28 November, the S&P 500 and Dow eked out marginal monthly gains, while the Nasdaq ended down about 1.5%, reflecting pressure on high-growth tech and AI names.

The late-month recovery was driven in part by rising expectations of a Federal Reserve rate cut in December and resilient U.S. macro data, including lower-than-expected jobless claims and ongoing evidence of a soft-landing scenario.

In commodities, precious metals continued to shine: gold extended its uptrend and silver posted another outsized monthly gain, supported by growing conviction that the Fed is nearing an easing cycle and by strong year-to-date returns in the broader precious metals complex. Industrial metals were more subdued on a one-month view, with aluminium, for example, down modestly over the period despite strong year-to-date gains.

By contrast, crypto markets experienced a sharp drawdown: Bitcoin fell more than 20% from its October peak above $126,000 to the mid-$80,000s in November, amid over $3.7bn of outflows from U.S. spot Bitcoin ETFs and a broader de-risking across digital assets.

Rates markets remained noisy but ultimately range-bound, with U.S. and European 10-year yields oscillating as investors weighed the timing and extent of potential 2026 easing, while credit spreads stayed relatively tight thanks to strong corporate balance sheets and heavy but well-absorbed primary issuance.

Against this backdrop, the strategy’s modest positive return reflects selective risk-taking in the parts of the opportunity set that were working in the current regime.

What Worked (and What Didn’t) in November

At the sector level, November’s PnL pattern was quite balanced, with no single asset class dominating, but a clear split between winners and laggards:

• Equities contributed around +0.3%, consistent with the late-month recovery in global equity indices and your ongoing long tilt across developed and selected emerging markets.

• FX – EM was one of the brighter spots, adding roughly +0.4%, as carry trades and idiosyncratic EM stories continued to reward selective risk-taking despite a choppy dollar backdrop.

• Precious Metals added about +0.35%, in line with renewed strength in gold and especially silver as markets leaned further into the dovish Fed narrative.

• Rates made a small positive contribution of roughly +0.1%, reflecting modest positions, notably small longs in USD rates and shorts in JPY.

On the negative side:

• Energy detracted about -0.1%, as crude markets remained under pressure from soft demand signals and ongoing concerns about oversupply, echoing the International Energy Agency’s observation that benchmark North Sea crude has been in a multi-month downtrend on rising inventories and softer demand.

• Agriculture (Agri) was a larger drag at around -0.21%, consistent with the year-to-date pattern of mean-reversion.

• Crypto detracted roughly -0.18%, in line with the November drawdown in Bitcoin and the broader crypto complex.

Credit, FX-DM and Inflation were effectively flat on the month, contributing little to overall returns.

Positioning: Carry, Credit and Selective Equity Risk

The portfolio’s exposure profile over the period reflects a deliberate blend of carry and pro-growth risk:

• On the credit side, some of the largest notional allocations were into intermediate-maturity credit default swaps (e.g. Japan 5Y, Australia 5Y, EU and North American IG 5-year indices). This is consistent with a carry-oriented stance that benefits modestly when yields are stable and spreads remain contained.

• In FX, the strategy maintained meaningful long exposures to selected EM and high-carry currencies such as TRY and MXN, while running shorts in lower-yielders and currencies associated with looser policy stances (e.g. CNH, NOK, parts of North Asia FX), reflecting the ongoing divergence between carry-rich and funding currencies.

• In equities, the exposure set remained diversified across major indices, including FTSE 100, IBEX, MSCI Singapore and Russell 2000, with a clear tilt toward markets benefiting from AI, global trade re-routing and resource themes, in line with the signal configuration described in last month’s report.

On a notional/NAV basis, the book still looks like a confident but diversified pro-risk stance, with equity and credit risk complemented by targeted curve and FX positioning.

Theme Attribution: Technical Strategies Lead as Sentiment Dominates

Across the three underlying engines, performance dispersion was modest but instructive:

• Technical strategies delivered the strongest return at around +0.9%, capturing the late-month rebounds in equities and metals and navigating the mid-month drawdowns with relatively limited damage. The robustness of trend, reversal, and curve-based signals continues to show up in choppy markets where direction is challenged, but price patterns still carry information.

• Fundamental strategies added roughly +0.5%, supported by their ongoing preference for growth-linked assets (equities and selected EM FX) over pure safe havens or duration. The environment: soft-landing data, stabilising credit picture, and gradually improving real-economy indicators, remains broadly aligned with their constructive stance. This relative underperformance of the fundamental sleeve came in a month when the macro data were improving while price action and sentiment were doing the opposite - the disconnect I highlighted in last week’s Volatility Without a Cause. The models did their job: they stayed constructive on growth even as markets briefly mispriced the macro backdrop.

• Risk Premia strategies detracted around -0.4%. Given their inherently long-biased profile, this is consistent with the sectors that struggled in November: energy, agriculture, and crypto. These areas offered weaker or negative returns to beta and carry despite the broader resilience of risk assets, and that cost the strategy a small amount of performance.

At the Composite level, the 50/30/20 blend of Fundamental, Technical and Risk Premia still produced a smoother, more resilient result than any one sleeve alone - a pattern that is increasingly visible in the five-year track record shown below.

Looking Ahead: Constructive Signals, Measured Positioning

November delivered a decent but not an outsized payoff, and reinforced the value of a disciplined, signal-driven, cross-asset approach. The strategy generated a +0.7% gain in an environment where:

• headline equity indices were volatile and mixed across regions,

• precious metals resumed their outperformance after a strong correction,

• crypto assets underwent a sizeable adjustment, and

• rates and credit were noisy but ultimately range-bound rather than trending.

The current configuration of the quant signal ensemble - bullish but not euphoric in equities, constructive in EM FX and metals, and neutral in “pure macro” markets like core rates and G10 FX - remains consistent with a late-cycle, soft-landing environment where risk is still rewarded but selectivity and diversification matter.

Disclaimer

We do not provide dealing, solicitation, or advisory services in futures or securities, and we do not offer asset management services. All our publications are made available to the public. Authors’ personal allocations and opinions are provided for educational purposes only, are not tailored to any specific reader, and do not constitute investment advice.

Quant Signals: Reflationary Growth Regime Without Excess

Across more than 150 instruments in my systematic framework, the composite signal set (Fundamental 50%, Technical 30%, Risk Premia 20%) continues to point to a constructive global macro backdrop, with some differentiation across sectors and regions.

The overall configuration of signals points to a continuation of the reflationary growth environment. Risk assets remain supported but not overstretched. Commodities (particularly energy and metals) and credit continue to lead, while equities maintain broad-based strength. Currencies and rates appear stable, reflecting a late-cycle consolidation rather than a renewed policy pivot. Within this cross-asset picture, the composite model continues to favour pro-cyclical exposures in equities, metals, and select EM FX, while keeping a neutral stance on duration and inflation markets.

Energy: Moderately Bullish and Broadly Supported

Energy markets remain moderately bullish. Crude benchmarks such as WTI and Brent show solid fundamental support and recovering risk premia, more than offsetting weaker short-term technicals. Refined products markets remain supported thanks to still-solid demand for transport fuels and recovering refining margins. Gasoline and gas-oil cracks have strengthened in key regions, underpinning refining profitability even as long-term structural headwinds persist. Natural Gas remains directionless, with weak technicals and mixed fundamentals leaving the composite signal near neutral.

Commodities: The Repricing Pulse Remains Strong

Industrial metals display a firm pro-cyclical bias. Copper and aluminium both carry positive composite readings, supported by strength across both fundamental and technical dimensions. The breadth of bullishness from copper to zinc suggests that cyclical demand expectations and positioning dynamics are aligned. Here, technical momentum is the dominant driver, consistent with a market that continues to price a “reflationary growth” narrative.

Precious metals are modestly positive, with platinum and silver showing the strongest signals. The tone is mainly technical, as trend support remains intact despite softer risk-premia inputs. Gold’s balanced bullish reading suggests that investors are neither chasing safe havens nor fully embracing risk.

Agricultural commodities are broadly neutral, although cross-currents are significant. The grains complex remains subdued, reflecting weak technicals and ample supply fundamentals. Coffee and livestock, by contrast, stand out as idiosyncratic outperformers with strong technical and fundamental support. These are likely driven by localized weather or supply-chain effects rather than a broad turn in the agri complex.

Equities and Credit: Broad Strength Led by Semiconductors and Resource Markets

Equities remain one of the strongest themes across the framework. Developed-market indices show widespread bullishness, led by semiconductor-heavy markets (Taiwan, Korea), resource-linked indices (FTSE 100, JSE 40), and global trade re-balancing beneficiaries like Singapore. Both fundamental and technical signals contribute meaningfully, suggesting that current momentum is grounded in macro data rather than speculative trend following. Emerging-market equities show a similar tone, with strong signals in South Africa, Malaysia, and India.

Credit signals are distinctly bullish, particularly in Europe and Asia-Pacific. These regions show strong alignment across all three signal components, with improving fundamentals and supportive technicals. U.S. IG and HY also remain positive but appear more mature, suggesting limited room for further tightening compared to their peers.

Currencies: USD Range-Bound, EM Carry Still Attractive

FX positioning is broadly neutral for the U.S. dollar complex. The dollar remains range-bound across majors, with GBP showing some bullish bias, supported by positive carry dynamics and policy pressures. In emerging markets, moderate positive signals cluster in high-carry and improving-beta currencies such as TRY, MXN, and ZAR, consistent with constructive risk sentiment. North Asian currencies (TWD, KRW) remain weak, reflecting deflationary pressures and policy divergence from the Federal Reserve.

Rates and Inflation: Neutral Overall, Japan the Clear Exception

Rates and inflation markets are largely neutral. Most developed sovereign curves show small positive or near-zero composites, with modest upward technical bias offset by negative fundamentals. Japan stands out with bearish rate signals across maturities, pointing to potential policy normalization and rising yields. Inflation-linked markets are subdued, with U.S. and European breakevens trending toward neutral or slightly negative territory, driven more by weak risk-premia than by shifts in fundamentals.

Equities Remain the Best Game in Town

Am I concerned that most of this year’s returns have been driven by equity strength, especially after “Liberation Day”? Not really. While the dominance of equities is clear, it reflects conviction more than complacency. Cross-sectional dispersion across equity markets is low, similar to mid-2022. While this limits relative opportunities between regions, it also signals a broad global consensus behind the bullish equity theme. The average composite signal for equities is now at its highest level in five years, although still below +50, implying moderate rather than euphoric optimism.

Beneath the surface, the fundamental backdrop is supportive. The growth pulse stands near +60, while the inflation pulse sits around –50, a combination that effectively describes a “Goldilocks” environment of steady growth and benign inflation pressures. The Granger macro signal for equities, averaging around +40, aligns with this interpretation, reflecting constructive readings across rates, credit, and commodity markets.

As shown in the chart above, these signals have swung widely in recent years, from deeply bearish in late 2019 and mid-2022 to strongly bullish in late 2021 and early 2024, but current levels are far from extreme. This dynamism is a key strength of the model: it adapts to changing macro regimes rather than passively leaning long to capture the equity risk premium. In short, there should be no reason for concern; if the regime changes, the signal will turn bearish accordingly.

The Missing Link: Lack of Conviction in Rates and Inflation Swaps

The picture becomes more complicated in Rates, where signals are clustered around zero. The model shows elevated dispersion both across curves and across countries, indicating some RV opportunities, but also an almost complete absence of global directional conviction. In other words, the underlying strategies are struggling to form a coherent and sustained view against the priced policy direction, and this continues to suppress the opportunity set.

Part of this hesitation stems from the inflation markets. Inflation swap strategies, which delivered exceptional returns in 2021 and 2022, have since lost their sense of direction. Attempts to re-establish a sustained inflation trend have failed, leaving the average signal near zero. With breakevens and real yields both stabilizing, the model interprets this as equilibrium rather than opportunity.

Beyond Equities: Select Opportunities in Commodities and FX

Until inflation and policy expectations break out of this equilibrium, the clearest opportunities continue to lie outside of duration exposure. Select commodity and FX positions remain appealing, particularly the constructive stance on energy and metals, the bullish bias in credit spreads outside the U.S., and the positive signals in high-carry EM currencies such as TRY, MXN, and ZAR.

So rather than being the only game in town, equities remain the best game in town. They are supported by fundamentals, confirmed by cross-market dynamics, and validated by systematic signals that remain responsive rather than complacent.

Performance Review for Oct 2025: Growth in the Driving Seat

The Composite Strategy rose +2.3% in October. The strategy benefitted from strong long positions in equities and industrial metals, while smaller shorts in inflation and agricultural markets detracted modestly. Overall, October was a risk-on month across most asset classes: equity indices advanced, credit spreads tightened, and industrial metals sustained their summer rally.

From “Hawkish Cuts” to a Soft Landing

Markets continued to digest the Federal Reserve’s September “hawkish cut.” Economic data in the U.S. and Europe pointed toward a soft-landing scenario - strong enough to sustain growth, yet tame enough to contain inflation from re-escalating. The S&P 500 advanced about +2.3% for the month, led by AI-driven technology stocks, with Europe and Asia following suit. Yields edged slightly lower, the dollar weakened against emerging-market peers, and commodities traded with a split personality: copper and aluminium extended their gains on tight supply, gold oscillated but ended firmer, while oil and grains eased amid rising inventories.

Equities and Metals Lead; Energy and Agri Lag

Gains were concentrated in Equities (+2.0%), Industrial Metals (+0.4%), and Precious Metals (+0.3%). The equity book profited from long exposure to developed-market indices, where both Fundamental and Technical themes remained constructive. Industrial metals benefited from copper’s resilience, while precious metals contributed despite gold’s sharp mid-month swing.

Losses were modest and primarily linked to Energy (−0.1%), Agriculture (−0.1%), and Inflation Swaps (−0.1%). The energy sleeve faced range-bound crude markets in the low-to-mid $60s; agricultural longs were hurt by falling grain and soft-commodity prices; and the inflation theme slipped as breakevens narrowed alongside softer energy data.

Positioning Reflects a Confident Long Bias

Average exposure through October showed a deliberate tilt toward growth and carry. The Composite Strategy maintained longs in Credit (+98%) and Equities (+56%), consistent with improving macro momentum and still-favourable policy expectations. Smaller longs in EM FX (+18 %) matched the weaker dollar trend. The strategy also carried shorts in Inflation (−11%) and DM FX (−6%), both modest detractors as yields eased late in the month. Crypto (+2%) stayed near neutral, contributing little overall. (Exposures represent average notional/NAV percentages.)

Balance Across the Three Themes

Across the three underlying frameworks, performance was well balanced.

• Fundamental models led returns, driven by long signals in equities and metals and short exposures to inflation-linked instruments.

• Technical models profited from persistent uptrends in risk assets, though were modestly hurt by choppy price action in energy.

• Risk Premia strategies, inherently long biased, continued to capture the pro-risk sentiment in equities, credit, and inflation swaps, offset by weakness in agriculture and crypto positions.

A Resilient Mix in a Maturing Cycle

October underscored the durability of the quant blend. The alignment between macro fundamentals and tactical trend signals helped sustain positive returns, while the long-bias Risk Premia theme amplified the pro-growth tone. Gains centred on cyclical assets, reinforcing the narrative that inflation pressures may be receding and policy easing may lie ahead.

Looking forward, the strategy remains broadly long risk but with rising cross-sector dispersion. Metals and equities still screen as the strongest long signals, while inflation and agriculture retain short exposure. As volatility compresses into year-end, my diversified signal mix remains well-positioned for selective reflation.

Appendix: Quant Framework Overview

My Composite Strategy integrates three complementary themes: Fundamental, Technical, and Risk Premia, into a single composite quant strategy. Each theme draws on distinct data sources, analytical models, and time horizons, ensuring the strategy remains diversified across both signal type and market regime.

• Fundamental (50%)
  The Fundamental theme captures macroeconomic drivers and relationships across global markets. It synthesises information from economic releases, inflation and growth dynamics, cross-market dynamics, and trade data. This framework identifies directional opportunities within both broad and country-specific macro cycles.

• Technical (30%)
  The Technical theme focuses on market behaviour rather than fundamentals. It combines medium-term trend strategies with reversal signals and curve-related anomalies. The goal is to exploit persistent patterns in price action and therefore complement the slower-moving Fundamental signals.

• Risk Premia (20%)
  The Risk Premia theme captures systematic sources of return that are compensated over time. It includes drivers like the equity risk premium, term premium, credit risk premium, FX carry, and active long/short strategies that are correlated with the broad market factor. These strategies provide a steady structural core that performs best in stable, pro-growth environments.

Together, these themes are blended into the Composite Strategy, with weights of 50% / 30% / 20% respectively. The framework balances macroeconomic forces, market dynamics, and structural risk-taking, a deliberate design that allows my quant process to perform in a range of different environments and market regimes. This diversified framework ensures that no single source of return dominates over the long term and that the strategy adapts naturally to changing market regimes. This strategy targets 10% annualised volatility. All returns in this report are expressed in USD, in excess of cash.

Disclaimer

We do not provide dealing, solicitation, or advisory services in futures or securities, and we do not offer asset management services. All our publications are made available to the public. Authors’ personal allocations and opinions are provided for educational purposes only, are not tailored to any specific reader, and do not constitute investment advice.