Global markets were busy dealing with the situation in the Middle East for much of Q1. This overshadowed events in Brazil, where a combination of early positioning ahead of the elections in the autumn, an energy-driven export tailwind and a continuing carry appeal in FX provided some with healthy gains across various Brazilian assets.

We turn to Brazil as one of our favourite places to allocate capital in the emerging market space right now. For some of the thematic drivers, like carry, the consensus framing is relatively simple and attractive. Yet for other narratives (that a shift to a right-wing regime under junior Bolsonaro would be a large positive), the picture is more nuanced.

Below, we outline our outlook on Brazilian politics, energy, interest rates, and broader cross-asset dynamics, alongside actionable trade ideas. Consider this a structured guide through one of the more compelling opportunities in emerging markets, best read with a caipirinha in hand.

SUMMARY

We believe that Brazil has the potential to outperform both at an absolute and relative level this year, based on three strands of reasoning:

• A Lula continuity victory could be taken as a better outcome than a right-wing regime change. Lula is not fighting Jair Bolsonaro, but rather his unproven son, who risks alienating voters from better right-wing candidates.

• The net energy export status provides beneficial terms of trade, boosting related domestic equities and providing a tailwind for continued BRL appreciation.

• Elevated interest rates will continue to satisfy yield-hungry investors, especially when paired with low-yielding currencies like JPY, which is likely to remain under pressure throughout this year. The potential for an energy-driven inflation shock further reduces the likelihood of any material easing from the BCB.

Continuity Over Convexity

A BTG Pactual/Nexus ​poll published at the end of March showed Brazil’s President Lula da Silva and Senator ‌Flavio Bolsonaro tied at 46% in a potential run-off in the October elections. When you consider that Bolsonaro only entered the race in December and had an assigned probability of winning of 15% in the middle of January, the poll highlighted a trend that had gone under the radar for much of Q1, namely that Bolsonaro is now seen as the main challenger to Lula.

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Yet from a macro perspective, Q1 opened with a familiar tone. Disinflation narratives fraying at the edges, commodities reasserting themselves as the marginal driver of macro, and equity markets still leaning into a narrow set of secular winners.

That equilibrium of constrained volatility did not last for long.

With the benefit of hindsight, writing in April, what followed in Q1 was a period defined by an abrupt regime shift. More specifically, the conflict in Iran (which began on February 28th) provided a sharp transition from a pre-conflict environment to a global headache. It forced markets to confront the reality that geopolitics is no longer a background variable but a primary driver of cross-asset pricing.

For macro traders, the period was one in which a year’s worth of P/L could be made or lost in a single day. When considering moves in oil and Euribor futures, we can reframe the timeline to hours.

The distinction between thematic investing and tactical positioning blurred as macro shocks forced even the highest-conviction ideas to pass through a liquidity filter. This ultimately punished anyone that though those forces would play out in a straight line.

What follows is our attempt to map that transition, assess where we were right, where we were not, and how the experience reshapes our positioning into Q2.

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Q1

The portfolio entered the year leaning heavily into the themes that defined the tail end of 2025: commodities, defence, and the evolving AI stack. In the opening weeks of January, it felt as though we were playing a game of Texas Hold’em where we had been dealt the “bullets.”

However, the quarter can be categorised into two definitive dynamics: pre-war and post-war.

Commodities led the charge, as our thematic basket gained 30% into the end of February as the “debasement” narrative took hold. The momentum was checked by the silver crash in late January, but ultimately the names held up strong considering. The real momentum unwind in metals came after the start of the Middle-East tensions and forced a recalibration of these holdings and our “hot hand” portfolio.

Our defence exposure acted as a necessary hedge to this volatility, providing a steady return while the macro dust settled. Global geopolitical friction is now a permanent feature of the investment landscape.

The sudden removal of Maduro in Venezuela provided the catalyst for our idiosyncratic Venezuela basket, which capitalised on the prospect of regional stabilisation and debt restructuring to return 23.5% over the quarter since inception.

We also saw significant alpha from our alternative asset manager basket, which rose 18% since its inception in early February. This thematic was an expansion of a short trade that we started in Blue Owl (OWL US) in Q4 of last year. As the Software-as-a-Selloff trade consumed markets in the form of the latest AI development, we increased this single trade into a basket of short trades in BDCs, looking to gain from rising stress in private credit. Markets were already punishing private credit before the war, and a risk-off environment to end the quarter only aided these positions.

The market has a way of punishing hubris. The outbreak of hostilities in Iran shifted the board entirely. The dynamic played into your hand if you were a commodity-focused shop (notably Andurand, finishing Q1 up 31.1%), but the broader impact for strategies was a tougher one, and we did not go unscathed.

The most fascinating (and painful) development was the behaviour of gold. Despite its status as a geopolitical hedge, gold fell 24% following the breakout of the war. As we detailed in our market memo, we witnessed a decoupling: sovereigns who had spent years building gold reserves were forced to use the metal as a “funding vault” to acquire dollars for oil. The fundamental fear bid was overwhelmed by a need for liquidity.

Read more: “A Chink in Gold’s Armour”

To protect the core, we spent mid-March raising cash and reducing exposure across the portfolio. This defensive posture cushioned the end-of-quarter sell-off in the equity portion of the portfolio (tracked on RunPlutus).

FX & Rates Portfolio

Our dedicated commentary channel for FX and Rates is APFX Research, where users can find regular trade notes and a portfolio trade tracker.

YTD trades and performance can be found below:

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Most consensus trades are bruised, but still fighting.

The AI trade, however, has turned the page to a harsher chapter. Over the long arc, artificial intelligence should be pro-equity, and we believe it will be: productivity up, margins up, multiples justified. In the meantime, it is indiscriminately killing SaaS stocks.

The catalyst of the recent software slaughter is Anthropic’s new tooling, Claude Code and Cowork (as well as other “vibe-coding” startups), which repositioned AI capabilities from a clever assistant to a junior employee. While various business models are threatened, software-as-a-service is particularly vulnerable. AI-native firms can often offer quicker and cheaper solutions, meaning companies that once operated in a defensible sector are now at risk of competition from new players. Users with no coding experience can now build software, dramatically lowering the programming skill barrier and undermining rigid, one-size-fits-all products.

Markets are in a shoot-first, ask-questions-later environment. Guilty until proven innocent.

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The other casualty is private equity’s decade-long software binge, something credit desks have started calling “Loan-aggedon.” Wall Street’s largest alternative-investment firms are under pressure, driven by fears that artificial intelligence-driven disruptions would cause steep losses on their books. Blue Owl (OWL US), built on financing software businesses and a name we hold short exposure to in the portfolio, now trades where it last did in September 2023.

The latest leg lower reflects mounting concerns about the fallout that AI will cause among software companies, many of whom received funding from alternative asset managers at lofty valuations. UBS Group AG analysts this week estimated that private credit could see default rates surge to as high as 13% if the disruption is aggressive.

Anxiety about software has been simmering for months, but in recent weeks has boiled over into the leveraged-loan market, and this week the splash reached alternatives and business development companies (BDCs). Shares of BDCs, which pool private credit loans, have also hit multi-year lows as investors assess the level of software exposure in their portfolios. The lack of reporting means that while shares may trade daily, their portfolio health is only updated quarterly.

The SaaS Slaughter and the Capital Structure

We were not positioned for the velocity of the SaaS unwind and missed the boat with this one, but the momentum leg of this trade may have run its course. Markets occasionally hand out perfect pitches. More often, they do not, and the job is to recognise when the easy money has been made and where the asymmetry now sits.

There are reasonable arguments that the equity slaughter pauses from here, or at least the worst of it is done. Businesses such as Intuit are defended by proprietary data and by the swamp of the US tax code, a moat that even an eager AI struggles to drain. Bank of America made a point on SAP, which is busy turning the threat into a product by embedding its own agents inside client workflows. The market has not yet separated the indispensable from the ornamental.

Our preference is therefore to express the theme lower in the capital structure. The loan market offers cleaner asymmetry. More than $17.7bn of US technology loans have slipped into distressed territory over the past month, taking the total SaaS-heavy distressed pile to roughly $47bn, the largest since 2022. Equity can stabilise on hope and narrative; credit eventually meets the covenant.

This is why we have leaned on shorts in the alternative managers space, with Blue Owl the clearest expression in the portfolio to date. The risk-reward here is more convex than in listed software. Equity can stabilise on a story about reinvention. Private credit cannot mark to a narrative forever.

The structure of the business model compounds that problem. Alternative managers collect fees on assets, not outcomes, and many of these assets were financed at lofty valuations with thin equity cushions beneath them. The risk/reward is therefore skewed. Upside is capped at maintaining current marks and fee streams, and the downside is disproportionate because loan recoveries rank ahead of the manager’s equity. When underwriting assumptions fail, the write-downs bypass the fee layer and land directly on shareholders.

Unlike SaaS equities, where prices can overshoot and rebound on a single product announcement, the credit cycle moves in arrears. Defaults arrive with a lag, restructurings grind on for quarters, and quarterly reporting means investors discover the damage in instalments. Slow recognition on the way down and capped participation on the way up is why we prefer expressing the theme through shorts in the financiers rather than the software itself.

Per Barclays, BDCs have around 20% of their portfolios tied to the sector. However, if a software company sells into healthcare, many funds classify it as healthcare exposure. The result is that true software risk is materially higher than headline allocations suggest.

Some words from the Street…

• UBS: While the timing of future disruption remains uncertain, under an “aggressive AI disruption” scenario, we expect defaults to rise unevenly across markets to 2%-4% in high yield, 6%-8% in leveraged loans, and 12%-13% in private credit.

• Citigroup: We initiate an underweight recommendation on software loans, in line with our general cautious positioning in the asset class. In our view, yields in the 6%-8% range for much of the sector mean it has limited appeal beyond real money and CLO investors.

• Morgan Stanley: We like shorting loan total return swaps vs. high yield total return swaps on the back of higher software exposure and worse convexity.

• Barclays: Software equities are down around 15% YTD, and software BSLs have declined 3-4 points in the past few weeks. At a minimum, this decline could increase the LTVs of the loans that BDCs make to the sector. More serious risks include possible obsolescence of some software borrowers, which could introduce more material asset quality issues in BDC portfolios.

Alongside our short position in OWL US, we’re adding short exposure to ARES US and KKR US.

As we get underway in the second month of the year, the lesson learned is that 2026 will sort the AI winners from the AI victims, and the scarce skill will be avoiding the latter rather than discovering the former. For now, we would rather own the data centres, the GPUs, the robotics, and short the financiers than chase a SaaS rebound or further leg lower.

AP

Heading into 2026, that challenge hasn’t gone away. Several themes have raced out of the gate in January, putting them front and centre in the portfolio:

• The continued spike in Commodities merits serious attention.

• Defence has come out of the background and firmly warrants a seat at the table when it comes to allocating capital right now.

• The rise of GLP-1 is another theme we continue to bang the drum on, with headlines so far in January indicating it has legs to run higher.

• In other areas, conviction in picking becomes harder. For example, as the AI capex cycle matures beyond raw hardware into power, grid, and real-economy bottlenecks, the task isn’t just identifying the themes (anyone can say buy AI), but understanding where infrastructure, energy, supply chains, and demand drivers intersect in ways markets are just beginning to price.

This note updates our views on each thematic basket and current portfolio positioning (live portfolio access linked at the end).

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Don’t Fade The Commod Boom

+32%. Plenty of tailwinds are driving us to increase our existing allocation to hard assets.

The boom in metals, both precious and non-precious, has been quite extraordinary. Yet despite some calling for a crash in position unwinds late last year, the commodities have pushed even higher over the past month, with silver leading the charge, +41.9%, and +73% from our longs in mid-November.

We’ve been in the bullish camp for some time now and outlined in our November note that we prefer to play the moves on related equity names to benefit from operational leverage. What we mean by that is when a miner experiences an increase in the price of the underlying metal, the boost to revenue outstrips any higher costs. Of course, this works the same way on the way down: fixed costs must be paid even when the metal is trading below the firm’s breakeven price. But when we’re in a bull market (hint, we are), it can provide scaled upside. This is reflected in our holdings in Freeport-McMoRan, which provides a high-beta vehicle for both copper and gold, along with Pan American Silver, a key silver name.

We see a supportive macro and micro backdrop for gold, silver, and copper this year, with each metal offering a distinct but complementary expression of the broader commodities bull case.

Gold remains the clearest vehicle for what we would characterise as the ongoing “debasement trade,” as persistent fiscal expansion and rising sovereign debt burdens globally reinforce the case for reserve diversification and hard-asset hedging. The situation in Japan this week is a good case in point. With the Federal Reserve likely to move further into an easing cycle, the prospective decline in real rates should reduce the opportunity cost of holding gold, while elevated geopolitical risk related to Trump should continue to put a bid under the precious metal.

Silver appears positioned to benefit both from idiosyncratic fundamentals and from its historical tendency to lag and then accelerate after gold-led moves. The market continues to face a meaningful supply-side imbalance, driven by constrained mine output and limited primary silver project development, even as industrial end-use demand remains firm. At the same time, silver’s higher beta to US equities and risk sentiment gives it convexity in a risk-on environment, creating a setup where firm equity markets can reinforce the ongoing move.

Copper, meanwhile, reflects the industrial backbone of the cycle. Years of underinvestment have tightened the supply outlook. The data below suggests it’ll enter a supply deficit this year.

This comes just as demand is being structurally reset higher by electrification, grid expansion, and, increasingly, the build-out of AI and data-centre infrastructure. These projects are copper-intensive across various parts of the build-out, embedding long-duration demand into the outlook at a time when new large-scale supply remains scarce. The combination of constrained mine development and accelerating technology-driven consumption leaves copper well positioned for sustained pricing power.

Both platinum and palladium are experiencing related supply deficits, with basket exposure via Valterra Platinum and Impala Platinum.

Finally, a word on natural gas. We continue to hold EQT, which is still up circa 2% over the past year despite the 23% fall in Nat Gas over the same time period. This has impressed us, and partly speaks to its delivering strong earnings growth and cash flow generation even as gas prices have softened. Therefore, we’re happy to hold here. Even though the opportunity cost of allocating the capital elsewhere exists if gas continues to roll over, it provides a great way to capture upside on a bounce.

We currently hold in our basket:

• Freeport-McMoRan (FCX US)

• Pan American Silver (PAAS US)

• EQT (EQT US)

• Valterra Platinum (VALT US)

• Impala Platinum Holdings (IMPUY US)

• Rio Tinto (RIO LN)

A New Dawn for Defence

+117%. Defence spending has shifted to a new gear in 2026 on the back of rising geopolitical tensions.

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Anyone who spends their days immersed in this business—tracking the swings in data (or the absence of it), the ever-rotating narratives, the sudden bursts of liquidity and the equally sudden vacuum—knows how arbitrary that ritual really is. The calendar offers no extra edge. January 1st does not magically improve anyone’s visibility into the future. If anything, the market usually prefers to humble anyone who starts the year with too much conviction.

And yet, every December, we all do it anyway. We zoom out, wipe the P&L slate clean in our minds, and try to make sense of the bigger picture. Not because the date matters, but because stepping back matters, and December just happens to give everyone an excuse.

So here we are. End of December. Reflecting again. But this year, rather than returning to the usual formats that often make for an insightful read—the “26 for ‘26,” the panoramic cross-asset outlook, the greatest hits of upcoming themes—we wanted to approach this exercise from a different angle.

“Consensus Trades” are supposed to offer comfort: a large crowd seeing the same thing usually feels like validation. But the market has never cared for validation. A trade embraced too tightly, repeated too confidently, or extrapolated too linearly tends to approach its natural limits. And when everyone starts using the same language to describe the future, that’s usually the moment when the future finds a new language.

So we asked ourselves a simple question: Which consensus views have become overstated, over-owned, or over-trusted? And are we willing to take the other side?

From that came this year’s note: “Out of Consensus.”

A thematic watchlist of mispriced stories, stretched assumptions, and contrarian trades that might only matter when nobody expects them to. Maybe they won’t materialise. Perhaps only one will prove decisive. But if the past year taught us anything, it’s that preparation beats prediction, and that being slightly less wrong at the right moment is often enough.

To start, we need to determine the consensus trades. In all honesty, finding these wasn’t hard. Anyone who has spent time reading the year-ahead notes from the sell-side, coupled with social media musings, will be able to discern what the crowd believes.

So let’s get into it.

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The Crowd’s Consensus

There are a handful of consensus trades markets will carry into the new year with a fair degree of confidence.

• Equities — Long AI, RoW > US, underweight UK, SPX 8,000, double-digit gains

• Commodities — Bullish gold, silver, copper on continued rallies, nat gas as a more recent consensus long, bearish oil on increasing surplus

• FX — USD underperformance, EUR strength, long FX carry

• Debasement Trades — out of fiat and into gold (making an appearance again) and alternative assets like crypto/bitcoin

• Deflation and Rate Cuts — especially from the US, while the EU and UK hold more steady

• “Run It Hot” — Trump “juicing” the economy ahead of midterms, alongside his sidekick, Bessent, and incoming new Fed Chair

None of this is contrived. These views come straight from headlines, strategist notes, and conversations with readers. Some are simply extensions of what worked in 2025, others are newer expressions of the same underlying instincts.

And to be clear, most of these are not easy—or even sensible—to fade. Trends persist for a reason, and many of the catalysts behind them are unlikely to unwind neatly over the next twelve months.

But every so often, a consensus becomes a little too comfortable. That’s where we’re willing to step in. For 2026, we have four views where we’re prepared to take the other side.

First up…

A Consensus Too Comfortable

The first contribution to our Out of Consensus list is the simplest one to articulate and the hardest one for markets to price correctly: Rate cuts.

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UK politics has moved from a brief post-election honeymoon into something closer to managed instability. Prime Minister Starmer’s approval ratings have deteriorated sharply as voters struggle to connect Labour’s technocratic tone with any tangible improvement in daily life.

That weakness has opened the door to the first murmurs of internal dissent. So far, we haven’t seen outright coups, but there’s enough background noise for leadership threats to feel plausible if the party’s polling slide continues.

Chancellor Reeves, once positioned as the steady hand of economic credibility, is now carrying the heaviest burden. The upcoming budget has become a political and fiscal headache. If Reeves pitches too much towards austerity and breaks any of the three main tax pillars included in the manifestos, Labour risks accusations of betrayal. If she’s too loose and she spooks the gilt markets, the Truss/Kwarteng fiscaco might look like a minor inconvenience.

Put simply, everyone from institutional rate desks right through to grandma in the north of England is already wary of the UK’s debt dynamics.

Welcome to Rachel’s Reckoning.

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The Delicate Dilemma

Labour came into power promising a tightly defined set of tax commitments: no rises in income tax rates, national insurance for employees, or VAT, and a cap on corporation tax at 25% for the full Parliament.

Those pledges were designed to signal stability and reassure voters after a decade of erratic fiscal policy. But the reality facing Reeves is far harsher than the manifesto’s assumptions allowed. The UK’s public finances now show a fiscal shortfall variously estimated at £30–50 billion, with some five-year projections stretching closer to £100 billion once downgraded productivity forecasts and higher debt-service costs are included.

Even the most conservative numbers (around £22 billion just to keep public services standing still) imply a structural gap that the government cannot ignore.

This leaves Reeves in an awkward position for the budget next week, in that she needs to raise revenue without breaching the headline tax promises that helped Labour win power.

The current composition of Government receipts highlights the difficulty of boosting revenue when key sources (such as income tax) are off-limits.

As a result, attention has turned to measures that sit around the manifesto rather than through it. Freezing income tax thresholds, which quietly pulls more earners into higher tax bands, is a near-certainty and could raise £7–10 billion.

Reforming reliefs are also very much on the table. These range from pensions to dividends to specific business allowances. Each measure offers more scope for revenue without touching the protected headline rates. Wealth-focused measures, including changes to non-dom rules or second-home taxation, remain politically attractive. And while corporation tax may be capped, pressure is building around employer contributions and the broader business-tax ecosystem.

The fiscal hole is too large for cosmetic tweaks, but breaking manifesto pledges outright risks the government’s political credibility at a delicate moment.

In this note, we run through the budget’s implications for specific asset classes, drawing on insights from good friends (and experts in their respective fields), then present our own actionable ideas across markets.

Politics & Macro

From Ryan Paisey, Founder at PiQ

The political dimension of this budget cannot be separated from its economic consequences.

Starmer’s net satisfaction score stands at -66, placing him ahead of Rishi Sunak and Liz Truss, and even beyond alongside Gordon Brown, Boris Johnson, and Margaret Thatcher as among the weakest Prime Ministers at similar points in their first terms, while polling shows 56% of voters think the Prime Minister should step down, with 57% believing the same of Rachel Reeves.

Yet the uncomfortable truth for markets is that, as damaged as Reeves’ credibility may be, the alternatives are considerably worse. The obvious Treasury replacement would be Torsten Bell, whose enthusiasm for aggressive taxation would likely trigger the gilt market panic everyone is working to avoid.

Splinter groups within the Labour Party are beginning to prepare for a leadership contest, but the names being floated from various factions across the party represent politicians who are woefully inadequate for navigating a fiscal crisis.

The political calendar compounds this dynamic, as Labour faces local elections on 7 May 2026. Significant losses are widely expected. Any serious challenger would be better served waiting until after May’s drubbing to pin the blame on Starmer and Reeves.

What this means in practice is political purgatory. Markets know this government is finished, but the exit sits beyond May 2026.

We have a lame-duck Government trying to maintain fiscal discipline while lacking the authority to enforce it.

This is why a number of analysts are identifying politics rather than fiscal policy itself as the biggest risk to gilt markets. Any leadership challenge could raise concerns about fiscal discipline, particularly if it led to a more left-leaning chancellor replacing Rachel Reeves. The “better the devil you know” principle applies with unusual force. Reeves may lack credibility, but she understands that breaching fiscal rules triggers market crises. Her likely replacements either don’t grasp this reality or don’t care.

The base case isn’t a functioning government delivering sensible policy. It’s a mortally wounded administration stumbling toward May 2026 while trying not to spook markets.

Put another way, in my view, the real tail risk isn’t Reeves failing. It’s what comes after her.

A leadership contest producing a more left-leaning Treasury team could transform today’s manageable fiscal concerns into a confidence crisis.

FX & Rates

From Michael Brown, Senior Research Analyst at Pepperstone

Perhaps the simplest way to look at UK assets in the run-up to the Budget is to look at Gilts as a barometer of fiscal risk, and at the GBP as a pressure release valve for if, or indeed when, that fiscal risk grows too great.

Naturally, looking at Gilts in isolation doesn’t tell us especially much, given that the direction of travel is almost always identical to that of other DM govvies. Instead, a much better gauge of the market’s perception of UK fiscal risk is to look at the spread on the 10-year Gilt yield, over that of the next highest G7 benchmark – a market that’s been nicknamed a ‘moron premium’ by those less charitable than I!

Perhaps surprisingly, this spread was actually slowly but surely fading away for much of the pre-Budget period, from over 60bp in mid-September, to as tight as 25bp in mid-November, in a sign that while market participants had accepted that the upcoming fiscal consolidation would largely take the form of sizeable tax hikes (most notably an increase in income tax which, while far from being the ‘best’ option given the obvious negative impact on personal consumption, was the ‘least bad’ of the options available), with the government both unwilling, and seemingly unable, to enact sizeable spending cuts.

Energy

By

Last week, Doomberg put out an article titled Late Britain. In it, the team laments a compounding failure of energy policy, industrial strategy and political will. When it comes to the key energy sector, there are some good takeaways ahead of the budget.

To begin with, Reeves will have to decide on the Energy Profits Levy (EPL). As Doomberg notes:

“Although the Californication of the British energy regulatory regime has been decades in the making, it reached its zenith in May of 2022, when Chancellor of the Exchequer Rishi Sunak introduced a windfall profits tax on oil and gas companies. Ostensibly, the move was in response to soaring energy prices and was originally set to expire in 2025. Instead, the Energy Profits Levy (EPL) has been raised twice and extended to 2030, leaving energy companies facing a stifling 78% marginal tax rate. It’s no wonder the stampede for the exits has been disorderly.”

A few weeks ago, the Financial Times published a classic trial balloon about her thinking:

“Chancellor Rachel Reeves could scrap a windfall profits levy on the UK oil and gas industry sooner than expected, after Prime Minister Keir Starmer said he wanted to ‘double down’ on North Sea extraction.

Reeves is considering using her Budget to end the energy profits levy in March 2029—reversing a decision in last October’s Budget to extend it by a year to March 2030—according to people briefed on her thinking.

But the chancellor, under fierce fiscal pressure in her Budget, is seeking assurances from oil and gas companies that the move would result in new investment and jobs, and ultimately more tax revenues for the exchequer.”

At the start of November, Offshore Energies UK (OEUK) and Scottish Renewables sent a letter to the Chancellor calling for the EPL to be replaced urgently, the first time both groups have made such a joint effort. It warned that “we face a widening gap in jobs, investment and capability that will weaken our economy.”

This follows on from an OEUK letter signed by more than 110 companies. It noted:

“We are witnessing an accelerated decline in activity that is undermining the value of the sector and the supply chain capability we need for our energy future. Job losses are occurring at an unacceptable scale, and there is an urgent need for supportive policy to unlock investment, drive economic growth, and safeguard the UK’s energy transition.”

Doomberg concludes his piece by noting the following.

“This is the political backdrop against which Reeves will soon decide the fate of the EPL and, with it, what’s left of British heavy industry. If she flubs the Autumn Budget, Britain could be thrown into a bond-market crisis like the one that crippled Truss. If major changes to the EPL are not proposed and ultimately passed in Parliament, the country’s economic death spiral will likely accelerate. If she does try to scrap the tax, she’s likely to face fierce opposition from the Miliband wing of the Labour Party.

One way or another, Reeves will soon confront a historic fork in the road. Let’s hope she takes it.”

AP Trade Ideas

The UK heads into Budget week with political capital draining, market patience thinning, and a structural fiscal problem that can no longer be smoothed over with clever wording or marginal tweaks.

Even though pessimism has partly been priced in, there’s still a long way to go for some assets, depending on what exactly gets announced next week. Time to distil the above thoughts into tangible ideas.

Macro Angles

Rates: Long UK 2s30s

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2025 has been a year where opportunity and ambiguity have arrived in equal measure. Markets haven’t lacked for themes; they’ve just lacked clarity at times. The narrative tape has been running fast. AI build-outs reshaping capex cycles, geopolitical tensions shifting supply chains in real-time, and yes, the occasional policy signal delivered via Truth Social at 2:14 a.m.

For macro and thematic investors, the challenge hasn’t been finding stories, but filtering the signal from the spectacle.

In a landscape where headline noise travels faster than fundamentals, the aim is simple: identify the themes with structural longevity and rotate out of those running on narrative fumes. With that in mind, we’ve taken stock of where our current thematic baskets stand, how each thesis has evolved, and where the next leg of alpha may come from.

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We receive messages from subscribers looking to allocate capital to our portfolio. Alongside the likes of Citrini and Le Shrub, we’ll shortly be listing our baskets on Run Plutus.

There, you can link to your IBKR or brokerage account and allocate funds to any/all of our baskets. When we rebalance a portfolio or basket, it automatically adjusts on the client’s side. Think of it as an institutional-level copy trading service.

Register for the launch here.

Art of the LNG Deal

Original Note: 16th April

The core idea here was that liquefied natural gas (“LNG”) was being positioned as a geopolitical and transactional lever, a deal-making tool for Trump’s trade objectives. We emphasised how supply/demand dynamics, contract structures and geopolitics intersect in the LNG space.

We have reduced some exposure to this theme towards the end of the summer, but like to retain it for a few reasons. Geopolitics remain very much alive: energy security, Europe’s push to diversify away from dominant suppliers, and Asian demand growth all give potential upside for LNG exporters. In the short term, if demand spikes (cold winter, supply constraints) while new capacity is delayed, LNG can outperform general energy commodity baskets.

However, our choice to take some risk off the table mainly stems from oversupply concerns. New LNG capacity is still coming online globally, which could put pressure on the margins of various stocks within the basket.

We’ve also seen AI push for clean energy, which doesn’t bode well for sentiment around LNG.

Bottom line: Hold

Back to Basics

Original Note: 28th August

From Gap’s viral denim campaign and American Eagle’s Sydney Sweeney ad, the notion of companies outperforming from broad appeal, shared recognition, and cultural resonance was the key driver in this theme.

The thematic play remains very much alive and well, but is a basket that needs to be actively traded, given the fleeting nature of some virality campaigns and subsequent share price movements.

Some of our highest conviction names in the basket, including AEO, have performed very well in just a couple of months, and we see traction in holding these for the foreseeable future.

Yet evidence of being careful came from us buying CPRI (the owner of Jimmy Choo) in early September, with a volume spike on the stock following Sydney Sweeney’s appearance in a new campaign. We ultimately sold this position earlier this month after a lack of meaningful follow-through.

Bottom line: remain active and nimble

Lean Mass, Fat Margins

Original Note: 30th July

The explosion of GLP-1 therapies (weight-loss drugs) is reshaping not just the obesity market but the broader pharma landscape. The next leg of the trade, which we flagged in the summer, was finding companies that can preserve or build lean mass while delivering fat loss. Think of combining GLP-1s (or GLP-1/GIP combo drugs) with myostatin inhibitors or other muscle-anabolic adjuncts. If you don’t know all the details, don’t worry.

This theme still has a large upside. Clinical efficacy is real, as GLP-1s deliver sustained double-digit % weight loss.

The article’s poster child, Regeneron, is up 15% since publication. It reported strong Q3 2025 results on Tuesday, with revenue of $3.75 billion (beating estimates) and non-GAAP earnings per share (EPS) of $11.83 (significantly beating estimates). It saw positive performance in key drugs like Dupixent, whilst also achieving several regulatory and clinical milestones, including FDA approval for Libtayo and positive Phase 3 results for drugs in trials.

Bottom line: Overweight (pardon the pun)

Lighting the AI Fuse

Original Note: 11th September

Are AI stocks in a bubble? Yes and no. The broad notion of buying AI is a problem due to the varying ways in which it is being used and adopted, both at a commercial and a personal level.

That’s why we laid out three phases in the AI boom:

• Phase 1: Chips & raw hardware—basically “buy Nvidia and chill”. (The market caught this early.)

• Phase 2: Infrastructure—hyperscaler cap-ex, racks, data centres, power, cooling. The build-out.

• Phase 3: Enabled revenues—the moment when the infrastructure delivers monetisable applications, services and business models.

We feel this differentiation has become even more relevant for investors evaluating their equity exposure heading into year-end and beyond. Does the risk/reward stack up in adding new longs to NVDA as it passes $5trn in market cap? Probably not. Want selective beta exposure in case of a potential short-term tree shake? That’s where we feel people can be more confident in owning Phase 2/3 names and not fretting over a drawdown.

The bottom line: Be selective, but don’t bet against AI.

Power in Play

Original Note: 3rd July

The core argument of Power in Play is that the global power sector is shifting from a simple “generate electricity and sell it” model to a more complex landscape where control of the grid, pricing architecture, and regulatory positioning determine where returns accrue.

AI compute loads are driving power requirements sharply higher, as evidenced by last week’s news of Alphabet and NextEra Energy partnering to revive a nuclear site in Iowa.

We’re in a multi-year capex cycle for transmission, storage, and grid flexibility. Yet baskets need careful review. Our three core longs of NRG, VST and CEG are all up from July, but our short legs (the companies most exposed to regulatory lag, wildfire liability, rate cap risk, and renewables margin compression) have actually risen in value too, as the sector in general has been bid. As a result, we’ve shed the short positions and now run this as a long-only basket.

The bottom line: Long-only for the build-out.

The Emerging Markets Mosaic

Original Note: 2nd October

The mosaic concept from October was built on the idea that emerging markets (EM) aren’t a monolithic block anymore, but a mosaic of very different country stories.

Argentina has proven in recent weeks that these countries can exert a strong influence on global markets, along with selective intervention from developed economies (in this case, the US).

We believe EM has been neglected, with countries like Brazil posting substantial equity gains YTD yet receiving little coverage. The broader appeal of this theme lies in its truly cross-asset nature, which allows it to be covered.

Given we only posted this theme a month back, there are no fundamental changes to comment on, bar the incredible moves in Argentinian assets post-election, which show the size and nature of flows that can get involved at very short notice.

The bottom line: Go company-specific for in-depth views, or passively track MSCI EM:

That wraps up the rundown of where the portfolio sits to date. As always, a like and/or comment if you’d like us to provide these thematic ledgers more regularly.

AP

Emerging markets live in the gap between fragility and opportunity. Right now, that gap is widening. A softer Fed and a weaker dollar are breathing life into battered valuations, even as political risk keeps everyone honest. After a lost decade of underperformance, EM is finally benefiting from liquidity rotation out of the US and Europe. Investors are still structurally underweight, and that under-ownership leaves plenty of room for flows to do the heavy lifting.

It is not a single story but a kaleidoscope of moving parts. Equities are the headline, but the real drivers are scattered across FX carry, local rates, and sovereign credit. The common thread is dispersion. Some markets are thriving on global liquidity, others remain hostage to politics, and a few offer both at once.

So Far, So Good

Emerging markets have quietly stitched together one of their best runs in a decade. After eight straight monthly gains through August, the MSCI EM index added another +6% in September, taking YTD gains to +25%. The backdrop has been classic “risk on”: the Fed delivering its first cut since December 2024, AI optimism spilling over into equity multiples, and foreign investors finally re-engaging with an under-owned asset class.

The leadership has been clear. Tech-heavy North Asia and China have surged on semiconductors, hardware and internet stocks. South Africa has outperformed on miners, especially gold. The strength has been led by improving earnings sentiment, a critical confirmation that the rally has more than just liquidity behind it.

Looking ahead, the drivers remain in place. Fed easing is set to continue into year-end, the dollar is on the back foot, and flows into EM remain light relative to history. While inflows in Europe-focused funds have moderated after a strong 1H, EM funds have seen accelerating fund inflows in recent months as investors continue to diversify regionally.

Our view: In short, the EM rally can extend into year-end, but it won’t be a blanket trade. The opportunities lie in the dispersion. China is riding AI, Brazil offers a clean carry and commodity leverage, South Africa is finally finding momentum, and India is still a growth story but priced for perfection. Argentina, meanwhile, remains hostage to politics and is more a tactical trade than a structural allocation, and Saudi Arabia is a quiet outlier. Beyond equities, currency and rates markets add another layer of opportunity—themes we explore within this note.

In this article, we’ll review:

• Key EM markets we’re watching

• The macro drivers shaping them, from currencies to politics

• Where the trades lie, across equities, FX, rates, and credit

La Albiceleste, “The White and Sky Blue”

To start with, let’s consider Argentina and President Milei.

Argentina’s rebound has slipped into a holding pattern. The promise of a $20bn US lifeline and a temporary export tax windfall stopped the bleeding (news headline below), but neither has resolved the imbalances. The peso is already back under pressure, forcing interventions just days after its sharp rally. Bonds, briefly stronger, have resumed sliding. Words can reset sentiment, but sustainability demands details.

Milei has secured an impressive array of facilities: a $20bn IMF loan (frontloaded with $14bn), a $20bn swap line from the US Treasury’s Exchange Stabilization Fund, and accelerated disbursements from multilaterals. On paper, this looks like overwhelming support. In practice, it is a patchwork of short-term lifelines with little policy conditionality. Argentina’s reserves are thinner than reported, much of them tied up in yuan or bank requirements, leaving perhaps $7bn of usable cash. The danger is that fresh dollars get spent propping up an overvalued peso rather than rebuilding a credible external position.

The US package is particularly striking. Unlike past Treasury rescues (Mexico in the 1990s, for example), Washington has offered support without hard conditions. That gives Milei room to maneuver, but it also heightens the risk that funds are quickly depleted if policy does not shift. Without real exchange-rate flexibility or stronger reserve accumulation targets, Argentina risks burning through dollars and ending up back in the foxhole.

Politics sharpens that uncertainty. October 26 midterms are the fulcrum. Milei governs with thin margins, and a Peronist sweep would leave his reform agenda boxed in. His recent outreach to Mauricio Macri hints at a search for broader alliances, while cabinet changes after the vote are already being floated. These moves may stabilise his standing, but they also underline the fragility of his political base.

That makes this trade one against the clock. Carry remains attractive, and ADRs have offered a liquid proxy for those willing to ride the swings (a list of ADRs is shown below). But the market has already tested the limits of sentiment-driven rallies. Without political momentum and clarity on external financing, the peso will stay vulnerable and bonds capped.

Market Takeaway: From our perspective, Argentina is drifting back toward volatility. Milei has bought time, but not stability. The October midterms are the hinge, and until then, every peso move and policy signal is a referendum on whether the US backstop is real or just rhetorical.

Trade Idea:

YPF has been a high-beta Argentina vehicle, leading the post-election rally in November 2023 with a 40% gain versus ARGT’s 13%. Its recent pullback from late March to early April highlights its dual role: as a vertically integrated energy company, YPF is also a play on oil. With OPEC+ considering accelerated output hikes and US stockpiles building, crude faces headwinds on thin technical support. A sub-$60 CL print is not implausible near term.

Against this backdrop, we like YPF as a short if Milei falters in this month’s midterms.

Those following Argentina more closely will know the story doesn’t stop at sovereign bonds or ADRs. The peso’s violent swings this month highlight just how unstable the FX setup remains.

For our institutional clients, we’ve written separately on ways to position around that volatility, including relative value expressions against Brazil and tactical plays in NDFs. The full note is available below.

APFX Research

When $20bn Isn't Enough

The Argentine peso (ARS) closed Q3 with a thud, sliding 6% against the dollar on Tuesday. That follows a sharp rally earlier in the month after US Treasury Secretary Bessent dangled a $20bn lifeline…

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7 months ago · 6 likes · AP Research

The trade ideas in that piece are high-octane, but the core takeaway is simple: without a credible FX policy, Argentina remains reliant on other people’s money, and that leaves ARS skewed toward devaluation risk. For most investors, equities and bonds are already a high-risk punt. For those running dedicated EM macro books, the peso is the cleaner volatility trade.

If Argentina is the perennial cautionary tale, Brazil is the counterpoint next door—same neighbourhood, same political tensions, but very different outcomes.

Pindorama, “Land of the Palm Trees”

Brazil remains one of the cleanest stories in EM. It offers high carry, deep local investor demand, and commodity leverage in a world where both growth and inflation are diverging. The BCB’s cautious turn toward easing keeps real rates among the highest globally, anchoring the real as one of the best-performing EM currencies this year. For FX investors, BRL is not just a carry play, but a defensive one when global sentiment wobbles. The combination of yield and resilience has kept it at the top of EM currency performance tables in 2025.

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