AI, Inflation, and the Portfolio That Refuses to Sit Still | Systematic Investor | Ep.399

Summary

Alan Dunne and Niels Kaastrup-Larsen discuss how AI is distorting economic data, the collision of AI and geopolitical shocks creating stagflationary risks, and the role of trend following in adaptive portfolios. Alan announces the launch of his Regime Adaptive Fund, which combines strategic asset allocation with trend following to adjust to changing macro regimes.

• AI is driving a 31% growth in the AI economy but leaving the non-AI economy flat, distorting data and capex patterns.
• Geopolitical tensions (Middle East) create adverse supply shocks that push up energy prices and raise stagflation risks.
• Trend following has performed well recently, with a notable shift from long to short fixed income exposure.
• Graham Capital research shows macro strategies perform best during periods of monetary policy activity and dispersion.
• AQR's Jordan Brooks highlights trend following as an effective tactical asset allocation tool and discusses inflation risks for different asset classes.
• Alan Dunne launches the Regime Adaptive Fund, a multi-asset portfolio allocating 40% risk to trend following alongside equities and diversifiers.
• The fund targets 10-12% volatility and provides built-in adaptation to market regime changes through trend following.
• The conversation underscores the need for portfolios that do not simply sit still but adjust to evolving correlations and inflation.