SI415: Maybe This Is Just What Normal Markets Look Like ft. Alan Dunne

Niels Kaastrup-Larsen and Alan Dunne examine how a changing macro regime is reshaping markets and the role of trend following. They discuss unusual U.S. intervention in the yen, mounting sensitivity around Treasury yields, and questions surrounding Kevin Warsh’s communication and the Fed’s credibility. Alan identifies three fractures defining the new regime: persistent inflation, growing debt sustainability concerns, and the erosion of institutional norms. They also explore why trend following has performed differently this decade, particularly during periods of bond market stress, before comparing AQR and GMO’s strikingly different long-term return assumptions and what they imply for portfolio construction.

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Episode TimeStamps:

00:00 - Introduction and what’s been on Alan’s radar

01:55 - Why U.S. intervention in the yen matters

07:04 - Zuckerberg, Meta and the $16.68 billion question

08:31 - August trend following performance and market intervention

12:16 - Why CTA performance is increasingly dispersed

16:08 - Kevin Warsh, the Fed balance sheet and Treasury supply

18:56 - Has short-term trend following structurally degraded?

22:17 - Macro narratives versus systematic positioning

24:37 - Fed communication, credibility and the Warsh reaction function

30:16 - Bessent, Warsh, Druckenmiller and the battle over bond yields

34:23 - The three fractures reshaping the macro regime

41:42 - How trend following has changed in the new regime

49:54 - Commodities, deglobalization and diversification

52:29 - AQR versus GMO: radically different forecasts for future returns

01:02:08 - Debt sustainability and what investors should watch next

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