David Zervos 4.8 4 ideas

Zervos states that the "Economic Armageddon" predictions for both inflation and growth "have actually not played out," noting that CPI is back to 2.4% and GDP is "running at close to 3%." The bear case of stagflation or deep recession has been invalidated by the data. A backdrop of 3% growth combined with normalized inflation creates a "Goldilocks" environment that supports risk assets and broad equity valuations. LONG US Equities as the macro fundamentals remain resilient. Unexpected resurgence in inflation or a sudden deterioration in labor market data.

Zervos observes that "there is some reshoring. It's happening slowly" and that trade supply lines are moving. While not an overnight revolution, the structural shift toward reshoring supply chains provides a long-term tailwind for domestic industrial and manufacturing companies. LONG Industrials to capture the slow but steady value creation from supply chain localization. Higher labor costs in the US or aggressive tariff wars disrupting supply chains further.

Zervos highlights that "primary deficits are only in the... low twos" and that the broader deficit issue is largely "interest expense," which depends on "how the Treasury decides to issue" (short vs. long term). While low inflation (2.4% CPI) is bullish for bonds, the fiscal picture is complicated by interest costs. The future path of yields depends heavily on the Treasury's issuance strategy rather than just economic data. WATCH the Treasury's issuance calendar and yield curve control measures before taking a directional bet. A shift toward long-term issuance could spike yields despite low inflation.