Macro Observations

Japan is in trouble. There’s just no nice way to put it. A big reason why this may be an even larger problem this time around is the government’s massive debt load and aging population. This combination of eroded public confidence and the sudden vulnerability of financial institution balance sheets could spark a larger crisis that expands worldwide.

Small-caps have lagged large-caps pretty consistently throughout 2025, but more importantly, have yet to stage any kind of bounceback now that the trade war has de-escalated. That’s why the time for small-caps might be now. That could be the near-term catalyst for short-term small-cap outperformance, but the long-term catalyst is one that’s both long overdue and high on Trump’s agenda - deregulation.

If a cooling job market would argue for lower rates, but inflation argues for higher rates, the Fed waiting to see which one exerts more control over the economy could be the best way to approach it. If the Fed thinks the economy is still in reasonable shape, unemployment is still hovering near 4% and inflation is a risk due to tariffs, what motivation exactly does Powell have to cut rates? All of the evidence is pointing in the other direction.