The additional domestic risk premium continues to drive UK yields higher. On Tuesday, 30-year gilt yields touched 5.81%, the highest level since 1998, while the 10-year reached 5.13%, the highest since 2008. Although we often roll our eyes at “the highest since” comparisons, we believe the above references are worthy of inclusion.

With Britain’s borrowing costs now the highest among rich economies, and having risen the most since the Iran war began, it’s being priced most aggressively at the long end, where fiscal risk conventionally lives. If the two-year trades around the policy actions from the next few BoE meetings, the thirty-year is all about whether the policy regime still looks coherent five to ten years from now.

Simply put, the current policy regime isn’t sustainable, and we believe we could be close to a serious yield melt-up that could cause significant headaches for the Government. But for macro traders, there’s potential for several attractive rate trades.

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Election Results Fuse Politics With Duration

The short-term driver behind the latest leg higher in the UK long end came from the local election results late last week. This matters because they converted a bad macro situation into an open political one.

By last Friday evening, the governing Labour Party had lost 1,229 council seats, while the right-wing Reform UK had gained 1,372. It was one of Labour’s worst-ever defeats in local elections, and by Tuesday, more than 80 Labour lawmakers had publicly called on PM Keir Starmer to go or set out a timetable for departure.

For gilts, the question is what the government has to promise, spend, delay or abandon in order to make survival politically viable. Investors can see two paths leading to the same fiscal destination: the current leadership loosens policy to claw back voters, or a successor arrives with a looser bias already built in.

Option 1: Starmer Remains But Loosens Purse Strings

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We think the answer is more nuanced than much of the commentary suggests. The move higher in US long-end yields is not best understood as a purely domestic Treasury story. It is part of a broader global repricing of long-duration risk, with the US dragged into a move that has been far more aggressive elsewhere.

In the US, 5% 30-year yields still attracts buyers. In the UK, 30-year gilt yields at the highest level since 1998 are forcing investors to reprice political risk and diminishing fiscal credibility.

Rather than treating higher US yields as the cleanest expression of bearish duration, we think the better setup is relative, and outline a new spread trade below on the premise that US long bonds may remain volatile, but UK gilts look more vulnerable.

The Global Tail Wagging the US Dog

Let’s start our case by looking at the front-end policy logic, where recent meetings from the Bank of England (BoE) and the European Central Bank (ECB), presented a much easier stance to understand to see than for the Fed. The BoE kept the bank rate at 3.75% at the end of April, but its scenarios explicitly contemplated a “forceful tightening” if the energy shock produced material second-round inflation, and markets still price roughly two hikes this year.

The ECB also stood pat, but openly debated a hike at its April meeting and has since signalled that the chance of a move has risen, with markets now expecting the first increase by July and more coming by the end of the year. If the UK and the euro area are repricing for actual tightening, Treasuries were never going to ignore the same global energy shock altogether.

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We are sharing the latest BoJ note here for AP Research readers.

The Bank of Japan (BoJ) meeting earlier today was the first major G10 central bank meeting, with many looking for clues on how the respective bankers will position policy amid reflationary pressures.

Not for the first time, the BoJ made a bit of a hash of its meeting, issuing a mismatch of comments that saw the Yen initially appreciate before giving back all gains and then some.

When we dig into the details of the meeting and subsequent press conference, the desire to continue holding our short Yen position (expressed via a long BRL/JPY) remains firmly intact.

SUMMARY

• The significant revision higher in inflation forecasts should have merited a precautionary rate hike from the BoJ today.

• The 6-3 split, and unclear comments from Ueda, only add to the worry that the central bank doesn’t have a clear vision for policy going forward.

• Clear risks of getting behind the curve or hiking aggressively and quashing domestic demand mean we continue to play the Yen from the short side.

Inflationary Pressure

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Alongside that, we outline a tactical UK rates expression. The recent run of inflation and PMI data has nudged the market toward a hawkish near-term narrative ahead of next week’s Bank of England meeting, and we do not think it is priced correctly.

Before turning to those trades, however, it is worth pausing on a potential macro constraint that sits just ahead. A statutory deadline tied to President Trump’s handling of the Iran conflict could bring Congress more directly into the decision-making process, shaping the next phase of the conflict in a way markets have not yet fully engaged with.

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Trump’s D-Day

We could be approaching an inflexion point in US policy toward the Iran conflict, not due to commodity supply chain issues or the Hormuz Blockades-of-all-Blockades, but rather to statutory constraints imposed by the 1973 War Powers Resolution.

Under this framework, the president can conduct military operations without congressional authorisation for up to 60 days following formal notification to Congress. Given that Trump notified Congress on March 1st, the current case sets a key deadline of May 1st.

To date, congressional Republicans have largely supported the administration, blocking Democratic efforts to curtail the campaign. However, the upcoming deadline is beginning to expose fractures within the GOP, which we believe markets haven’t fully appreciated. Several lawmakers have signalled that their support may not extend beyond the 60-day window without explicit congressional approval, raising the probability of a policy pivot or heightened political tension as the deadline approaches.

What are Trump’s options? Beyond the 60-day mark, the president faces three main pivots.

1. Seek formal authorisation from Congress

2. Begin a withdrawal of US forces

3. Invoke a limited 30-day extension to facilitate a safe exit

Notably, this extension does not legally permit continued offensive operations, constraining the administration’s flexibility.

Importantly, precedent suggests the administration could challenge or sidestep these constraints, which wouldn’t surprise us with Trump. Yet, in terms of the precedent we speak about, it was actually President Obama who continued the 2011 engagement in Libya beyond the 60-day mark and argued that US operations didn’t involve sustained fighting or ground troops. This did incur bipartisan backlash, so any similar move by Trump risks increasing political pressure, particularly as some Republicans have already framed the 60-day mark as a meaningful legal and institutional boundary.

We could term the May 1st deadline as “a discrete political catalyst.” What we mean by this is that Trump is going to struggle to keep this conflict going on his own terms. Rather, as of next week, Congress is likely going to have a much larger say in deciding the path of the war. In some ways, it should help resolve the question of where the conflict goes from here, given that the range of outcomes is relatively constrained; the conflict is either extended, curtailed, or escalated through congressional involvement.

Notable Mini-Thematics

We’ve added three new standalone baskets on Plutus this week, focusing on topical areas where we believe investors can generate alpha in the coming months.

AI vs AI-At-Risk

We believe this group of 20 names is well-positioned for the current regime, as the market increasingly distinguishes between beneficiaries of AI capex and those exposed to its second-order disruption.

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A ceasefire in Iran has come closest to fruition since the escalations began in late February. However, in keeping with the current administration’s preference for maximalist leverage, this isn’t so much a white flag as it is a tactical timeout defined by an aggressive “15-point plan.”

From “Obliteration” to “Optimisation”

For the markets, the shift is strong. We were staring down the barrel of a Tuesday evening deadline, the point at which the Strait of Hormuz was either to be reopened or the Iranian military was to face what President Trump termed an “obliteration” attack.

Instead of the fireworks, we got a two-week, “double-sided ceasefire.” The geopolitical risk premium in Brent is currently being re-indexed. Equities, particularly those sensitive to energy inputs, can finally take a breather. We are moving from a fear of escalation regime to a sceptical stabilisation regime.

The architecture of this truce, brokered via Pakistani mediation, is precarious. It hinges on Iran agreeing to the “complete, immediate, and safe opening” of the Strait of Hormuz.

While Tehran has signalled acceptance, the devil is in the jurisdictional details. Iran has stipulated that “safe passage” would occur in coordination with their own military. In market-speak, this is counterparty risk. If the Iranian Navy is the one coordinating the passage, the definition of “safe” remains entirely at their discretion.

The 15-Point Reality

The diplomatic math here is a hybrid of two competing visions:

1. The Iranian 10-Point Proposal, which Trump surprisingly called a “workable basis” for negotiations.

2. The US/Israel 5-Point Overlay, the “hard” conditions regarding regional proxies and nuclear enrichment.

Combined, this 15-point plan represents a messy Venn diagram. Some points overlap (opening the Strait), while others (disarming Hezbollah) remain total non-starters for Tehran.

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This provided another Jenga-style piece removal of security with which the US economy is currently being propped up. The ongoing conflict in Iran is causing some to increase their probability of a recession. Although we wouldn’t position ourselves in the eternal optimists bucket, we believe there are several reasons why it’s still far too premature to start throwing around the R-word.

Things Are Different From 2022

Ok, technically, the last official US recession was in 2020. However, US GDP in the first two quarters of 2022 almost triggered a technical recession and provides us with the most recent blueprint to compare to. It’s also a relevant comparison due to surface similarities around an energy shock and geopolitical uncertainty from the start of the Russia-Ukraine conflict.

However, on reflection, the current macro backdrop differs materially from the 2022 recession template. Most importantly, the inflation dynamic is far less entrenched today. In 2022, economies experienced a shock as accelerating wage growth and tight labour markets emerged from the Covid pandemic, creating the conditions for a wage–price spiral. By contrast, wage growth is now moderating and labour market sentiment has softened significantly, reducing the risk of persistent inflation and pointing instead toward a more disinflationary or even deflationary impulse.

Policy settings also start from a fundamentally different place. Central banks entered 2022 well behind the curve, with rates deeply below neutral and forced into aggressive catch-up tightening (Powell might never live down his “transitory” comment from that time). Today, policy rates are already closer to neutral, with the Fed well into its easing cycle.

Finally, the labour and technology backdrop introduces a new asymmetry. Whereas 2022 was defined by labour scarcity, today’s environment is increasingly shaped by concerns around AI-driven labour displacement, contributing to weaker employment expectations and dampening wage pressures. Taken together, the current cycle lacks the key ingredients that drove the stagflationary shock in 2022.

Granted, this doesn’t excuse the worries about US vulnerability to growth downside, but it’s unlikely to result from a 2022 repeat of persistent inflation.

Current Indicators

There’s no exact science in determining which metric is the best when trying to predict a recession. Yet even if we take a spread of some of the most widely used or vouched-for, the probability still appears to lack any significance:

Bloomberg median forecasted probability of recession in 2026 (%):

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The recent drawdown in gold prices has been, in a word, violent. After a multi-year rally that seemed to defy the gravity of high real rates, the yellow metal has hit a wall of selling pressure. But to paraphrase a market adage: do not mistake a liquidity event for a change in regime. Our assessment is that the fundamental drivers of the gold bull market remain not only intact but are actually being strengthened by the very volatility that is currently depressing prices.

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Sovereign Sellers

The primary question on every desk right now is why gold is falling exactly when the geopolitical risk, specifically the escalation of the Iran war, is at its zenith. That answer lies in the plumbing of global finance, not in a sudden loss of faith in gold’s value. Gold is often described as the “ultimate haven,” but in the initial stages of this crisis, it functions as the “ultimate liquidator.”

The recent selloff has been predominantly driven by the urgent liquidity needs of major sovereign actors. For several years, central banks, particularly those in emerging markets, have been the dominant source of inflows into the gold market. However, a war in the Middle East and the resulting closure of the Strait of Hormuz create a specific kind of financial stress. When oil prices spike and regional currencies come under pressure, these same sovereigns often have to de-gross their portfolios to raise immediate cash.

In the early stages of a major macro correction or a geopolitical shock, investors and sovereigns alike sell what they can, not necessarily what they want to. Because gold is a highly liquid, deep market with no counterparty risk, it is the first ATM that central banks visit when they need to defend a currency or cover margin calls on falling equity positions. These liquidity-driven moves often disregard long-term fundamentals in favour of immediate solvency. When the Strait closes, the need for dollars becomes the only game in town.

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Markets tend to assume that geopolitical crises escalate until something breaks. History suggests the opposite is often true. The moment when investors begin to imagine the worst is often when the incentives to avoid it become overwhelming.

The confrontation around Iran has quickly become one of those moments. Oil has surged, tanker traffic has slowed almost to a stop, and risk assets have been forced to price a scenario that earlier this month sat firmly in the tail of the probability distribution.

Yet crises are rarely governed purely by ideology or military logic, and are more often constrained by economics, domestic politics, and the basic question of who, if anyone, actually benefits from prolonging the conflict.

Viewed through that lens, the current standoff begins to look less like the start of a long war and more like a high-stakes game of incentives (something we should be used to in Trump-office markets). And once those incentives are mapped out, several conclusions follow, including one that markets may not yet fully appreciate.

Hormuz has to reopen.

Problems in the Strait

At a fundamental level, a prolonged conflict is not in the economic or political interest of most actors involved, including Iran itself.

The Strait of Hormuz, through which roughly 20% of global oil and LNG flows transit, is a critical artery not only for Gulf exporters but also for Iranian crude shipments. Sustained disruption would therefore undermine Iran’s own ability to export oil (much of which is sold to China) and deprive the regime of one of its most important sources of foreign currency. Even amid the current crisis, tankers carrying Iranian crude have continued to transit the strait toward Asia, highlighting Tehran’s reliance on the route for revenue.

A similar logic applies to the broader region. Gulf producers, Asian importers, and Western governments all have strong incentives to prevent a durable closure of Hormuz, given the scale of global supply at risk. Tanker activity has slowed to a snail’s pace, with severe implications for global growth and energy prices if it continues for much longer.

Trump Has an Eye on Midterms

From a domestic political perspective, there are also strong incentives for the White House to avoid a prolonged conflict. President Trump has historically framed his foreign policy around decisive outcomes and rapid demonstrations of strength rather than open-ended military engagements.

A drawn-out confrontation with Iran risks undermining that narrative, particularly if it results in sustained instability in energy markets, higher fuel prices for US consumers, or the perception that Washington has been pulled into another costly Middle Eastern conflict. With the US midterm elections approaching, the administration will likely be acutely aware that geopolitical crises can quickly become domestic political liabilities.

Energy prices are particularly sensitive in this context. A persistent spike in crude would feed directly into gasoline prices, a metric closely watched by voters and historically correlated with shifts in political sentiment. For any administration heading into a midterm cycle, a sharp increase in pump prices can act as a powerful amplifier of broader concerns about inflation and the cost of living.

The optics are therefore important: a conflict that drives oil materially higher risks turning a geopolitical event abroad into an economic grievance at home.

In that sense, the political calendar matters. Midterm elections often serve as referendums on the incumbent administration’s economic management and overall competence. Allowing a geopolitical crisis to evolve into a persistent economic shock, particularly through higher energy prices or financial market volatility, would risk complicating the administration’s domestic narrative at a sensitive moment.

Peak Fear Priced

There are increasing indications that markets may already have priced in peak geopolitical fear around the Iran conflict, which could limit the scope for further large downside moves in risk assets.

Recent price action across asset classes suggests that the most aggressive phase of the risk-off adjustment may already be over (see Brent, G10 STIR, etc.).

Positioning indicators flagged levels of stress comparable to major crisis periods, with volatile markets briefly showing dynamics similar to those seen during the early stages of the pandemic. At the same time, cross-asset repricing was swift and broad, with equities, rates, and commodity markets all rapidly incorporating a higher geopolitical risk premium. This type of sharp, front-loaded adjustment is often characteristic of the point where markets begin to price worst-case scenarios rather than base cases.

From a market-structure perspective, the key point is that large directional moves become harder to sustain once investors have already repositioned defensively. In the latest selloff, the biggest drawdowns occurred in markets that had been the strongest performers earlier in the year, suggesting that investors rapidly reduced risk in crowded positions.

Historically, such episodes of intense repositioning often mark the moment when fear peaks rather than when the decline begins, as the marginal seller becomes exhausted.

Importantly, the focus for markets tends to shift from the absolute level of geopolitical risk to the change in expectations. Even if tensions remain elevated, what matters for pricing is whether conditions are getting worse or simply becoming “less bad.” Once the trajectory of events stabilises, markets often begin to recover even while the underlying geopolitical situation remains unresolved.

The likely outcome is that volatility gradually subsides and the geopolitical risk premium embedded in assets begins to compress as investors reassess probabilities rather than possibilities.

Positioning for De-Escalation

Oil Lower

• Buy a 2x1 put spread on COM6 (spot ref 102.50)

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Yet what we have seen this week (and as a partial follow-up to Software-as-a-Selloff) is the rise of what we’re calling the AI disruption vigilantes. This new breed of hungry equity traders has been out in full force this week, targeting various areas of the market where a high-fee, labour-intensive operating model could prove ripe for disruption.

Three key areas have been targeted this week, but the consensus trade for each one is different, as AI nuances are already becoming apparent.

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Financial Services (Tuesday)

The market reaction to Altruist’s latest release underscores growing investor concern that generative AI is encroaching on bespoke advice in the sector, one of the most defensible layers of the wealth management value chain.

The firm announced that its Hazel AI platform can now construct client-specific tax strategies by ingesting 1040s, payroll data, and account-level information and produce actionable recommendations within minutes. What has historically been a manual, high-labour component of advisory work is being reframed as a data-processing problem, and markets immediately priced in the implications for operating leverage across the sector.

Two companies we noted that took a hit (which has been exacerbated as the week has gone on) are LPL Financial and Charles Schwab.

In our view, the hit to both reflects fears that AI-enabled workflow compression could erode both pricing power and the perceived scarcity value of human advice.

If a single advisor can service materially more households (Altruist CEO Jason Wenk suggested as much when he said Hazel “expands what a single advisor can handle”), then revenue per advisor may rise, but industry-wide fee pools risk dilution as capacity expands faster than demand.

Tax optimisation has long been one of the most defensible justifications for advisory fees because of its complexity, regulatory sensitivity, and the need for cross-account coordination. By automating this function, AI threatens to commoditise what was previously a high-margin, expertise-heavy offering.

To clarify, we believe the concern is less about outright disintermediation and more about margin normalisation. Simply put, advisory firms may retain clients, but with lower incremental economics per relationship.

As far as the vigilante pursuit goes, we don’t see this area of the market posing serious risks relating to a complete decimation of related stocks. But we do believe the move lower is justified based on repricing long-term earnings expectations.

Real-Estate Services (Wednesday)

The vigilantes turned to real estate services the following day, using the same argument as they had used against finance firms.

The narrative that AI-driven workflow automation is migrating from back-office experimentation into core transaction functions caused significant hits to the likes of CBRE and JLL.

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Against that backdrop, we wanted to flag a few developments that feel more durable. Some thoughts, and a few charts, on (1) oil’s recent move higher, (2) a new allocation to copper, and (3) the latest turn in the critical minerals story.

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Oil, An Under-Positioned Rally

Oil, burdened in 2025 by signs of a glut, is having a resurgence this year. Two tailwinds are at play.

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On the latter, the real question is whether we’re about to see a continuation of a positive-correlation shock (stocks, bonds, and the dollar down) as foreign holders ditch the US further. Europe has relatively few effective levers against Trump’s America, but targeting US assets is one way that the Trump economic bloc will feel pain. For those who want to read more about these events, we wrote a few words in our secondary publication:

One Basis Point

Bye, America.

An across-the-board selloff in US assets on Tuesday (the dollar, stocks and bonds all sinking in unison) uncannily resembled the turmoil sparked by President Donald Trump’s blanket tariffs last year. On several occasions from March through August, these three asset classes repeatedly slid together, fueling speculation of a global rotation out of America…

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4 months ago · 5 likes · Jesse Williamson

Brutal As It Has Been, It Can Go Further

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Beneath the surface, we can gather more detail. The quarter-point move went through over the objections not only of a few voters, but also of several regional presidents who weighed in despite not holding a vote this year. Markets are also pricing a different path than what the median dot plot says, and by one measure of where the neutral rate is, maybe the Federal Reserve won’t need to cut at all.

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Silent Disenters

There were dissents, but maybe not as many as feared. Rumours leading up to the meeting were that as many as five voting members might dissent in a display of independence. But for now, a divided Fed is more together than expected. Schmid and Goolsbee voted to keep rates on hold. Miran, the most recent appointment from Trump, unsurprisingly voted to cut 50.

A quick look at the dots shows that not much has budged since September. For 2027, one lonely dot crept 25bps higher. For 2028, the same story—a single participant nudged their estimate up. Otherwise, stasis.

Officials still don’t see fed funds rising above 4% for the foreseeable future, and most of them don’t see it falling much below 3% either. The distribution has settled into a narrow corridor, reflecting a quiet consensus on what “normal” looks like in a world that keeps refusing to behave normally.

But there exist “silent dissenters.” These are the regional Fed presidents who joined the discussions but didn’t hold a vote this year, several of whom signalled they would have opposed the cut. Their dots imply a 2026 hike and, in some cases, no cuts at all over the next three years. They don’t have a formal say, but they do have a view, and it sits uncomfortably against the majority’s glide path.

The voting roster rotates in January. Cleveland’s Beth Hammack, Dallas’ Lorie Logan, Philadelphia’s Anna Paulson, and Minneapolis’ Neel Kashkari step in as Boston, Chicago, St. Louis, and Kansas City step out.

Hammack and Logan have leaned hawkish, arguing that inflation progress is still fragile. Paulson is new and focused on labour-market softening. Kashkari remains data-dependent but has cautioned that inflation may be harder to pin down than markets hope.

However, the Fed (and the market) seem to have an upbeat view of inflation next year.

Inflation

The statement still calls inflation “somewhat elevated,” but Powell avoided turning up the temperature in his press conference. Inflation estimates edge lower across the next three years, and everyone dutifully forecasts a clean return to 2% by 2028.

Markets seem even less bothered. One- and two-year inflation swaps have drifted back to pre-tariff levels. The gap between horizons has narrowed, effectively pricing the tariffs as a one-off shock that fades within a year.

For now, the Fed and the market are aligned. Both are acting as though inflation has been brought to heel.

But even with inflation viewed as comfortable or tolerable (even if elevated above the official “target”), we feel markets may be ahead of themselves with pricing rate cuts next year.

R*

The terminal rate has ticked up over the past month, despite Hassett being stated as the clear front-runner.

Theoretical economics offers its own guides to the neutral rate, such as the Laubach-Williams estimate, near 3.84% in nominal terms, or the Fed’s long-run dot plot, closer to 3%. At roughly 3.2%, the market’s expected terminal rate is parked near the bottom of that range.

If you want a market-based read on the neutral rate, the 10y1m OIS is a measure.

The rate has been drifting upward for the better part of two years. It now sits comfortably above 4%, and more importantly, the gap between the 10y1m rate and the market’s expected terminal rate has widened. In other cycles, whenever the terminal rate traded too far below this forward neutral proxy, it eventually snapped back toward it, the market’s way of acknowledging that the Fed cannot sustainably run policy below neutral without re-igniting inflation pressures.

If the market’s estimate of neutral is rising while the expected policy rate a year out is falling, that’s a tension that usually resolves in one direction: fewer cuts, not more. A central bank that cuts into an upward-drifting neutral rate would be easing policy outright, not delivering an insurance cut or a calibration tweak.

Of course, the debate around the neutral rate is ongoing, and we are not here to say the 10y1m is the only benchmark. But it highlights our one concern for interest rates going into 2026.

For other areas of the markets, a recalibration of the terminal rate may not be detrimental. Equities have proved they can be driven by many other tailwinds, such as the ever-increasing AI narrative, which has become the cornerstone of returns over the last three years, despite the stop-start nature of this Fed cutting cycle.

Cutting Through the Noise

At AP, we hold the view that markets are overpricing rate cuts next year.

• 57bps are priced for next year.

• The median dot plot (3.25-3.50%) is for just one quarter-point cut in 2026.

• And by one measure, the Federal Reserve already have an accommodative rate.

SFRZ6

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The losers get dumped, the winners get padded, volatile names disappear, and benchmark darlings mysteriously show up in all the right weights. Nobody wants to publish a December holdings report that reads like they missed the obvious trade (the NVDA of 2024 or the GOOGL of 2025). And because these moves are driven by optics rather than fundamentals, they create temporary, flow-driven distortions that often reverse sharply when the calendar turns.

That’s the part most investors miss, and it’s where the opportunity sits. If managers are dressing the window, we might as well look at the merchandise they’re tossing out.

Today, we note a few names we like as early-Q1 inflow candidates. Simple setups, clean theses, nothing over-engineered.

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A few points and thoughts are worth sharing on equities (NVDA, positioning), data (labor market, December FOMC), and Japan (JGBs, USDJPY).

A Respite Too Short

“There’s been a lot of talk about an AI bubble… From our vantage point, we see something very different.”—Jensen Huang.

Nvidia released blockbuster results once again, guiding $65 billion for the next quarter, $3 billion above estimates. The company also said that a half-trillion-dollar revenue bonanza due in the coming quarters may be even bigger than anticipated. But by Thursday’s close, what was supposed to be the backstop in the tech selloff had faltered. NVDA -3% on the day.

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Yes, we got a bounce. But the feel of the market is shifting. The odds of a sideways grind into year-end are rising, and the S&P 500 has probably already printed its highs for 2025. That turns passive exposure into a dead weight and puts active management back in the driver’s seat.

With P&L worth protecting and catalysts running thin, composite hedges are about to become November’s favourite trade. We like to refer to it as insulation for year-end, and a seatbelt for Q1.

Here’s our favourite cross-asset basket to hedge for the coming few months.

Hunting for Cockroaches

Fintech underwriting is running into real-world stress, and the failures at First Brands and Tricolor show how quickly these models can crack.

Both companies followed a similar trajectory of rapid loan growth during ZIRP, thin underwriting and misrepresented borrower quality. Once the credit cycle turned, the losses were immediate and severe.

On Friday, a Bloomberg article flagged up that a record number of Americans are falling behind on car payments, stoking concerns that more pain is in store for subprime auto lenders. Data from Fitch Ratings showed that the share of borrowers with auto loans at least 60 days past due rose to 6.65% in October, the highest level since 1994.

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By late Q3, gold had entered the “everything is a catalyst” phase. Every narrative (debasement, rate cuts, geopolitics, liquidity) was drafted to justify the move. Some of those tailwinds were real. However, most of the late-stage movement was driven by momentum and chasers. That, in turn, led to XAU’s strongest selloff in the last five years.

Now the dust has settled. XAU has rebuilt its base and is once again stalking its all-time high near $4,381.

The broader commodity tape looks constructive. Silver futures (SI) have already taken out their yearly highs. Copper (HG), capped for months by tariff noise, is setting up for a structural turn. The PGMs (platinum and palladium) have quietly based after the recent washout. Even NatGas (NG) is creeping back into view.

Each commodity tells a different story about positioning and cycle, but the direction of travel looks increasingly aligned. Commodity markets are worth examining for some exposure ideas, both in the underlying and related equity plays.

Below, we outline some of our favourite cross-asset trades.

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We also had a market pullback earlier in the week. 2025 has been defined by a persistent reluctance to sell winners and an equally persistent tendency to buy dips. Every correction has carried more fear than follow-through. Liquidity remains ample, corporate balance sheets are strong, and the structural demand for US duration-lite equity exposure hasn’t meaningfully changed. If anything, the path of least resistance is still up, just not in a straight line.

Against that backdrop, the latest round of earnings and commentary surfaced three themes worth leaning into:

• (1) The AI bottleneck is becoming clear.

• (2) Who hasn’t partnered with OpenAI at this point, but maybe this one name makes a rebound story possible.

• (3) High short interest name into earnings on our radar.

So here are a few market notes and additions to the portfolio:

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