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The Macro Regime Shift is Causing Investor Unwinds

Published on March 9, 2025

Jordi Visser

Summary:

In December, the Momentum Factor began signaling that a regime shift was underway. Volatility started climbing, and momentum trends encountered strong resistance. Over the past 30 days, this macro shift has accelerated as the Trump Administration clearly communicated to markets that there would be short-term economic pain—and importantly, no “Trump Put.” Adding to investor uncertainty, following President Zelensky’s meeting in the Oval Office, the EU surprised markets by announcing a dramatic increase in defense spending. This sent 10-year German Bund yields surging, marking their largest one-day jump in over 30 years. As a result of these shifts in expectations for US and EU growth, factors like 3-month EPS revisions, crowded trades, beta, and momentum strategies have significantly unwound. Hedge funds have faced heightened volatility and shifting correlations, resulting in considerable disruption.

In this week’s video, I break down these developments in detail, explain what’s driving the changes, and discuss key indicators investors should monitor going forward.

▶️ Watch the full video here

(00:00) Introduction highlighting the significant recent market shift, emphasizing there will be no “Trump put” to support falling stocks.
(01:09) Zelensky’s Oval Office meeting had a notable, yet underreported, negative impact on unwi.
(04:10) U.S. markets struggle significantly, with NASDAQ down 6% year-to-date, while Europe and China outperform.
(05:18) Trump administration signaling tariffs as part of a broader strategy focusing on Main Street over Wall Street, potentially causing short-term economic pain.
(06:16) Fiscal deficits and high debt-to-GDP levels combined with Stock Market Cap to GDP make current policy changes risky, diverging sharply from the Reagan era.
(14:20) Hedge funds are aggressively deleveraging amid rising recession fears and regulatory scrutiny, exacerbated by AI-driven investment strategies.
(24:53) U.S. consumer data suggests a rapid slowdown, fueling fears of a sudden economic stop and a potential recession scenario.
(40:06) Bitcoin emerges positively from the Trump administration’s support for blockchain, stablecoins, and digital assets, positioning it as a key beneficiary amidst broader economic uncertainty.

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