31 January 2026
2025 began largely as we expected up to the April crash. In retrospect, many professional investors were likely too bearish on the back-end of the tariff crash. There is a certain irony in modern markets where positioning and fundamentals can diverge sharply — and expensively. While many participants were focused on the bond markets, tracking whipsawing yields and the widening spreads that followed the April 2nd trade war announcement, a different cohort was not. The policy reversal on April 9th rewarded positioning over analysis as 2008 did before it. Despite choppy price action for three weeks after the market’s epic single-day rally, a new bull market was born after the US-China détente in Geneva.
The question for 2025 and 2026 is simple: how can the market justify sitting near all-time highs when the post-WWII global economic order has been fundamentally disrupted? The EU was the US’s largest, most predictable, and rules-based trading partner. Japan and China remain the largest foreign holders of US debt.
Our conviction entering 2026 became clear: reduce long exposure, hedge remaining core positions to protect unrealized gains while managing the tax event, and actively look for a potential negative repricing ahead.
Disclosure: This is an opinion article not intended as investment advice. Always do your own work and/or consult a competent advisor. Any opinions expressed are as of the date of publication.
