2026 Macro Outlook and Investing Plan

2026 Investment Outlook & Monetary Policy Expectations

Key Concepts:

• Quantitative Easing (QE): A monetary policy where a central bank purchases assets (like US Treasuries) to inject liquidity into the financial system.
• Quantitative Tightening (QT): The reverse of QE, where a central bank reduces its balance sheet by allowing assets to mature without reinvestment or by actively selling them.
• Supplementary Leverage Ratio (SLR): A regulatory requirement for banks, dictating the amount of capital they must hold relative to their assets, including US Treasuries.
• Federal Reserve Balance Sheet: The total assets and liabilities held by the Federal Reserve, a key indicator of monetary policy stance.
• Fiscal Policy: Government spending and taxation policies.
• Monetary Policy: Actions undertaken by a central bank to manipulate the money supply and credit conditions.
• Hemispherical Dominance: A shift in US foreign policy focus towards the Americas, potentially reducing global engagement.

I. Anticipated Rate Cuts & Fiscal-Monetary Policy Convergence

The speaker anticipates continued, potentially accelerated, interest rate cuts by the Federal Reserve in 2026. This expectation is heavily influenced by pressure from President Trump, who has publicly advocated for rate reductions regardless of market performance – a stance that deviates from traditional monetary policy principles. This push signals a growing convergence of fiscal and monetary policy, characterized by deficit spending financed by money printing, with the Fed maintaining lower interest rates to facilitate government borrowing below the inflation rate.

The appointment of the next Federal Reserve Chairman is considered crucial. Kevin Hasset is identified as a leading contender, mirroring President Trump’s views on the need for immediate rate cuts, suggesting he is “way behind the curve on lowering them.” This indicates a potential shift in the Fed’s leadership towards aligning with the White House’s economic agenda.

II. Resumption of Quantitative Easing (QE) & Balance Sheet Expansion

Beyond interest rates, the speaker highlights the Federal Reserve’s balance sheet as another key area of monetary policy. While quantitative tightening (QT) has ended, the Fed restarted a form of QE in early December, described as “QE light.” This isn’t a broad easing measure, but rather aimed at maintaining “ample” reserve balances within the banking system.

This mirrors a similar, less publicized QE initiative in late 2019, initially focused on Treasury bills to prevent a liquidity crisis. The current QE program is more aggressive, involving the purchase of Treasuries with durations up to 3 years. This process creates dollars “out of thin air,” injecting liquidity into the system and enabling the US government to borrow at lower rates. The speaker emphasizes this is an indirect method of government borrowing and money creation.

However, the speaker believes the scale of QE will be smaller than the $3 trillion implemented in 2020, due to public sensitivity surrounding previous money printing.

III. Bank Deregulation as a Key Driver of Liquidity

The speaker predicts that significant liquidity boosts will ultimately come from bank deregulation, specifically the removal of the supplementary leverage ratio (SLR). Governor Moran of the Federal Reserve, in a speech on November 19th, 2025, argued for allowing banks to purchase unlimited amounts of US Treasuries, similar to the policy during 2020-2021.

The rationale is that Treasuries can function as reserves for banks, and the Fed has demonstrated a willingness to backstop banks facing losses on Treasury holdings (as seen with Silicon Valley Bank through the Bank Term Funding Program). This deregulation would allow banks to finance Treasury purchases through lending, profiting from the spread between borrowing and lending rates, and potentially with unlimited leverage. This is presented as the primary mechanism for the US government to manage its substantial debt load. The speaker notes this is the “real reason why Treasury buybacks are accelerating right now.”

IV. Recession Indicators & Market Volatility

Despite the anticipated easing of monetary policy, the speaker acknowledges concerning recession indicators, specifically the rising US unemployment rate. Historically, an increasing unemployment rate has often preceded a recession. While a recession may not necessarily translate into a market crash, the speaker notes the US experienced what could be considered a recession in 2022, despite it not being officially designated as such due to the impact of money printing.

The speaker emphasizes that economic indicators can be contradictory, with the upper income brackets potentially thriving while the lower and middle classes struggle. This suggests increased market volatility is likely in 2026, building on the three 20%+ market drawdowns experienced in the last five years (2020, 2022, and 2025) – a historically unprecedented occurrence. The speaker’s base case is not a major market collapse, but preparation for heightened volatility is advised.

V. Investment Strategy & Portfolio Allocation

The speaker advocates for a portfolio strategy biased towards long positions with careful hedging. They anticipate continued outperformance in commodities, fueled by the easy monetary policy and increasing geopolitical competition for resources, particularly as the US shifts towards a focus on hemispherical dominance.

A recommended starting point for portfolio allocation is:

• 30% Stocks
• 30% Real Estate
• 30% Reserves
• 10% Speculation & Hedging

Key Investment Principles:

• Plan Your Exit: Define exit strategies (both for gains and losses) before entering a position.
• Avoid Large Losses: Prioritize capital preservation, as losses require proportionally larger gains to recover.
• Risk Management: Implement risk management techniques (stop orders, margin of safety, hedging, position sizing).
• Concentration over Diversification: Effective risk management allows for focused investment in potentially high-return opportunities.
• There is Always Another Trade: Avoid FOMO (fear of missing out) and recognize that investment opportunities are constantly emerging.

VI. Notable Quote:

“If you take care of your losses, your profits will take care of themselves.” – Emphasizing the importance of risk management.

Conclusion:

The speaker forecasts a 2026 characterized by continued rate cuts, a gradual expansion of the Federal Reserve’s balance sheet through QE, and significant bank deregulation to facilitate government borrowing. While acknowledging recessionary risks and potential market volatility, the overall outlook suggests a generally easing monetary environment that could benefit asset prices, particularly commodities. The core message is to prepare for volatility, prioritize risk management, and maintain a disciplined investment approach.