Some random thoughts

The global macro landscape remains in flux. A strange mix of structural deflationary forces is colliding with equally powerful inflationary pressures. Technology, demographics, geopolitics, and policy responses are all pulling in different directions — making this one of the most complex investing environments in decades.

I am not competent enough to decode where the current conditions are driving us. Nonetheless, I would like to share some random thoughts with the readers and seek their views on these.

Inflation vs Deflation: The great tug of war

At the structural level, Artificial Intelligence, aging demographics, and the rapid adoption of renewable energy are profoundly deflationary for the global economy.

·         AI is driving efficiency, collapsing cost structures, and displacing traditional labor models.

·         Demographics in most major economies — from China to Europe to Japan — are suppressing consumption growth and wage pressures.

·         Renewables are gradually reducing marginal energy costs.

Yet, short-term inflationary winds continue to blow.

·         Fiscal profligacy, especially in the US and large emerging economies, ensures that governments remain the biggest spenders.

·         Deglobalization and parochial geopolitics — from tariffs to tech embargoes — are reversing decades of supply-chain efficiency.

·         Rising defense spending, both in the West and the East, adds another layer of price rigidity.

Ironically, even AI — while deflationary in the long run — is pushing up energy prices in the short run, as data centers consume unprecedented power.

The result is a macro paradox: consumer inflation may stay moderate, but asset price inflation looks inevitable.

Japanification — slow growth, aging demographics, and low yields — already grips China and the EU. In contrast, the US remains the lone outlier, buoyed by fiscal stimulus and a technology cycle.

Gold: Monetary alchemy or bubble in waiting?

Gold remains the ultimate barometer of trust in fiat systems. As the world lives with near-permanent fiscal deficits, the case for gold as a hedge against monetary debasement remains compelling.

However, a curious distortion has emerged:

The total volume of paper and digital claims on gold — ETFs, futures, tokenized products — now vastly exceeds the quantity of physical gold available. This means that, in the event of a systemic rush for redemption, the notional market could implode under its own leverage.

While dedollarization and rising central bank purchases continue to support the short to mid-term case for physical gold, the near-term structure looks speculative. A bubble in gold positions cannot be ruled out, just because of over-financialization.

Bitcoin: The digital store of value narrative

Bitcoin’s journey from fringe curiosity to mainstream asset continues. Institutional acceptance is growing; sovereigns are experimenting with it as a reserve diversifier. Banks like J. P. Morgan Chase, which termed Bitcoin “fraud’ not long ago, have now embraced it. The key driver remains distrust in fiat money and political money printing.

Yet, the coming wave of official digital currencies (CBDCs) could complicate the landscape.

Governments will likely pitch their CBDCs as “stable digital cash,” competing for legitimacy and mindshare.

If Bitcoin manages to retain its decentralization ethos and scarcity narrative, it could coexist as the digital equivalent of gold — a hedge against monetary mismanagement rather than a transactional currency.​

​

​

Bonds: The calm before a possible storm

Central banks across major economies have begun cutting rates again, signaling confidence that inflation is under control. Markets have bought into this narrative. However, no one seems positioned for a reversal — a renewed spike in inflation due to energy, wages, or geopolitics.

If inflation re-accelerates, the bond market could face a brutal adjustment. Duration-heavy portfolios, built on the assumption of declining yields, remain vulnerable.

The irony is that sovereigns need low yields to fund ever-rising deficits — and this need might override pure inflation management. That tension will define fixed income in the years ahead.​

​

​

Equities: Between resilience and fragility

Global equities are not in bubble territory — though certain US pockets (AI, mega-cap tech) show unmistakable signs of exuberance.

The greater risk lies in a material correction in US markets, which could reverberate globally through portfolio rebalancing and risk aversion.

However, there’s a counterweight: if developed market central banks ease more aggressively than expected, it could unleash a wave of liquidity toward emerging markets. The result might be a sharp rerating of EM equities, particularly those offering growth and currency stability.

 ​

​

The Big Picture

We are living through a multi-speed world:

·         The US remains inflation-tolerant and growth-driven.

·         China and Europe slide deeper into disinflation and demographic stagnation.

·         Emerging markets stand at the crossroads of opportunity and volatility.

·         Markets are oscillating between the two poles of fear (inflation) and faith (liquidity).

Navigating this phase will demand humility, optionality, and patience — and an acceptance that the next decade will likely reward flexibility over conviction.