The 4th Turning is behind us. The repair phase is starting.
The Market is not breaking down!
This is Sector Rotation
[Written with research and editorial assistance from DeepSeek and Gemini. Ideas are from me!]
Yes, the market is not in perfect shape. VIXY is basing and curling up — not a good sign. Semis are under massive pressure. But here is what people forget: High Beta Models have been up over 100% YTD!
https://www.portfolio123.com/app/r2g/summary?id=1765750
And I warned to rebalance here > 6 Weeks ago —>
After a run like that, a pullback in that part of the market is entirely normal. It does not mean the market is in trouble.
The Regime Shift
It used to be that volatility like this signaled a flip between Goldilocks and Deflation.
But we are out of that secular regime. We now flip between Reflation and Stagflation. Why? (Demand) Policy changes by the US Administration — and because the US has to inflate away its debt. Nominal GDP is the target now. And that changes everything!
Why Deflation Is Off the Table
Warsh will stay put!
He sees Oil and Tariffs as a tax on the consumer — no reason for him to hike (and to create Deflation!). His “offload” of the Fed balance sheet will be a neutral asset flip to the banks, who can use the paper as collateral. The real danger — Deflation — is off the table.
The Two Regimes — Both Tradeable
So we are left with Reflation and Stagflation. In both regimes, you can make a ton of money. Stagflation is much better for parts of small caps than most think.
Large Caps also profit — Energy and Basic Materials lead the way. The Bottom Line The market is not breaking down. It is repricing the cost of capital and shifting factor leadership.
As long as systemic deflation is off the table and central bank liquidity plumbing remains functional — and both are the case — navigating between Reflation and Stagflation is not a crisis.
This is a target-rich environment for sector rotation and factor-based models. The #SecularBullMarketUSA has just begun.
The 4th Turning is behind us. The repair phase is starting.
See here ;-)
How Our All‑Weather Strategies Are Performing?
Update This stuff is free, be a member of my research group https://www.portfolio123.com/app/group/317 and have access to the following strategy books —>
I am more bullish (on the USA!) than I have ever been — though you better have models that can navigate these regimes.
And a model is not betting 100% on high Beta. A model is a strategy book that captures different edges of the market at the same time — permanently selling into current FOMO factors (like this year’s high Beta) and buying into current underperforming factors (like low vol, dividend growth, and quality) while Gold is the stabilizer of the portfolio.
The decision is simple: listen to the fear mongerers who sell into your biases and get eaten alive by inflation — or invest the right way and prosper.
Best regards,
Andreas
[Written with research and editorial assistance from DeepSeek and Gemini. Ideas are from me!]
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