Wolff's Macroeconomic Thoughts
A running log of my weekly macro-related updates
Every week, I write a brief entry on my current thoughts on the macroeconomic environment. I review macro data weekly to provide a higher level of risk management for my Autopilot subscribers. My list was getting too long for the Flagship weekly reports, but I know that many like to see the full picture (myself included). I’ll keep updating the log here, but I’ll still keep the current month’s outlook for my paid tier only.
Week 1 (January 4 - January 10): Historically, when the S&P 500 has posted a gain during the first five trading days of January, the index has ended the year higher approximately 80–82% of the time. This observation gave rise to the well-known Wall Street saying: “As goes the first five days of January, so goes the year.”
Week 2 (January 11 - January 17): Noticeable rotation from mega-cap and technology names to the broader market this week, increasing breadth expansion of investment across other sectors is healthy for continuation of the bull market
Week 3 (January 18 - January 24): In President Trump’s speech at Davos, he bragged that the US market “will double in a relatively short period of time.” This helps reinforce the view that the Trump administration will likely continue supporting markets with their policies into the near future, especially with midterm elections looming.
Week 4 (January 25 - January 31): Kevin Warsh’s nomination helped to provide the market signal needed to sell off overbought Gold and Silver positions on Friday, 01/30. He’s widely viewed as an “inflation hawk;” however, his economic beliefs broadly demonstrate the belief that growth is part of the solution to economic problems, particularly in AI.
There are fears that he’ll focus more on cutting deficits and potentially raise rates due to inflation; however, it seems more likely he’ll be cutting rates in the effort to help stimulate the economy at this time.
He’s a strong believer that the US cannot rely on government subsidies to achieve growth targets for the long term, and he’s a strong believer in reducing the Fed’s influence to promote real economic growth and other disinflationary forces.
This situation will require careful monitoring over the next few weeks, basically if he leans more to cutting spending and inflation reduction targets, the market could lean more bearish. If he leans more to growth and rate cuts, the market could lean more bullish.
A couple reasons precious metals did so well recently were due to the underwhelming results of DOGE and the perceived high government spending related to the Big Beautiful Bill. When Warsh was introduced, the market took his nomination as bearish precious metals due to his economic views.
Week 5 (February 1 - February 7): Based on my opinion and analyses, this fear and recent sell off has pushed prices down of many of the top Megacap stock names to share prices that are 10%+ undervalued at current levels! Over the last couple months, value stocks have been very overbought; whereas, tech and Megacaps have been very oversold.
Week 6 (February 8 - February 14): Market regime changed from Reflation back to Goldilocks. This risk-on regime continues to be supported by growth cycle, inflation numbers, monetary policy, deregulatory policies, and liquidity. However, positioning and technical indicators do lean toward continued market choppiness and a likely near term correction in the next few weeks.
Week 7 (February 15 - February 21): On Friday, the Supreme Court ruled against President Trump’s IEPPA tariffs. The Trump admin immediately countered with a 10%, then 15% global tariff that is active for the next 150 days. Tariff drama is back, but it’s unlikely to crash as badly as it did this time last year. The market has had time to price in tariff effects on goods and trade. Iran tensions are rising, more company earnings this week, and the State of the Union address is on Tuesday. Industrials, energy, staples, and materials (the safety trade) remain very expensive here.
Week 8 (February 22 - February 28): This weekend, the US and Israel attacked Iran. The market hates uncertainty, and geopolitical unrest has historically led to a flight to safety by investors. Investors are usually thankful to have some exposure to gold during these times. However, many of these past corrections have turned out to be excellent buy the dip opportunities on quality companies. Time will tell.
Overall, company earnings have mostly continued growing across the board. Based on historical PEG ratios, many of the top tech companies are trading at their cheapest forward valuation in years. Bears are betting that these forward earnings hit a wall soon, while bulls are betting these companies will continue to deliver on their forward guidance.
Technicals have gotten shaky, but key levels haven’t broken yet. The bull trend remains intact at this point.
Market regime backdrop remains positive for risk assets, and primary index RSIs are in reasonable zones. XLP (consumer staples), XLE (energy), XLU (utilities), and SPLV (low beta) remain in overbought territory at 70, 72, 75, and 79 respectively.
Market seems likely to continue chopping upwards over the medium to long term with a dovish Fed, pro-growth policies, deregulation effects, and positive liquidity cycle. Not financial advice, but as you’ll observe from my purchases below, I continue to buy dips at this point. If the macro and technicals change negatively, you’ll see bigger adjustments in the fund allocations.
Week 9 (March 1 - March 7): The Iran situation hasn’t resolved, employment data came in weaker than expected, and private credit conditions continue to worsen. The Fed is stagnant, stuck between inflation fears and employment concerns, and therefore, there are valid arguments to hold rates where they are and also to cut further. The war caused a significant amount of market position adjustments by fund to hedge for the downside (as it usually does with war); this has decreased the crowding in the bullish positioning overall. This hasn’t disrupted the longer term bullish trend yet, but it’s changed the market regime. This week, Wednesday’s CPI data and Friday’s PCE data are going to be significant indicators to the market whether the Fed has the excuse to cut rates earlier into the summer, or less likely. If both readings come in hot (indicating inflation), the market will likely react negatively. If both come in under expectations, the market will likely react positively.
Week 10 (March 8 - March 14): What a change! Regardless of inline CPI, this war situation is worsening technical structures across the board, particularly on Friday. these short-term macroeconomic data are concerning. Similar to the tariff shock, this risks further downside to the correction before stabilizing. With the upcoming Fed meeting this week, the market may feel it ends on a more hawkish note due to their fears surrounding oil-driven inflation from the conflict (thus the rapid market regime change).
Prolonging the war with Iran could result in a meaningful correction to risk assets.
Additionally, if investor psychology continues to worsen, assets can trade below their intrinsic values for an extended period of time.
I’m hopeful that the Iran situation improves quickly; the quicker the resolution, the more likely we can get back to a better investment environment.
Reduced risk across portfolios by increasing SGOV allocations
Week 11 (March 15 - March 21): As you’ve noticed from the data above, my technical indicators and macro data continue to deteriorate as this war drags on. The market is forward looking, and the market continues to price in worse outcomes as the escalation continues. Fear, portfolio positioning resets, and bullish crowding unwinds may continue to lead to a more significant correction. On the other hand, any signs of significant conflict deescalation that persist can quickly reverse course of the data deterioration.
The bond market is becoming increasingly concerned with this conflict, particularly demonstrated by stress in the CDX index. This is the benchmark measure of credit default swap spreads. In basic terms, stress in this area → tighter credit conditions → stock market revaluation due to reductions in growth expectations.
Credit to Lance Roberts for the following write up; it helps explain some of the reasons for my increased caution at this time.
“This is a chain reaction:1. Oil up → Gas prices up
2. Consumers spend more on fuel
3. Cut spending elsewhere
4. Company revenues weaken
5. Earnings (E) drop
6. Market valuations compress
7. Prices fall
Markets don’t fall just because of oil—they fall when earnings get hit.
So, what really matters now is the timeline of this event:1. Scenario A – Short-lived spike (< 30 days) will have minimal impact, and markets will look through it quickly.
2. Scenario B – Medium duration (2–4 months) will increase market pressure as oil prices will feed into inflation data, and the Fed may need to pause or shift policy.
3. Scenario C – Long duration (4–6+ months) will increase recession risk dramatically and lead to 10–20% market drawdowns, with the full earnings compression cycle kicking in.”We are still technically in scenario A today. In scenario B, we’d have to consider even further derisking measures.
Week 12 (March 22 - March 28): Outlook remains bearish; the market continues to derisk as the Iran War continues. Trump’s positive Truth Social Posts are having less positive effects on the market. We’re heading into the 1-2 month range of this Strait of Hormuz affecting the global economy. There’s still time for positive developments in the next couple weeks to reverse the correction course that we’re seeing.
Week 13 (March 29 - April 4): Oil prices remain at concerning levels, we’re drawing closer to the 2 month mark, where businesses will begin to feel the pain. President Trump’s budget proposal requests $1.5T for defense spending in 2027; this level of percentage increase on defense budget hasn’t been seen since World War 2. Watch for the CPI read this Friday, first read shown that contains elevated oil price shock on the economy; a worse than expected result will further decrease 2026 Fed rate cut chances.
Week 14 (April 5 - April 11): Big changes in charts, please review the changes in the boring macro data this weekend! CPI came in lower than market expectations, which was a helpful boost into Friday. The war isn’t over, but the Trump admin signaled this week that they’re pushing more aggressively to some sort of resolution to this war before midterm elections. Unfortunately, VP Vance’s Iran negotiation efforts were unsuccessful, which likely leads to more volatility in market price action and oil prices heading into this next week. The longer oil remains above $100 and the Strait of Hormuz remains closed, the more likely the longer term negative effects hurt earnings and guidance, leading to a potential deeper market correction. All that said, meaningful tailwinds in the monetary policy cycle, the fiscal policy cycle, the growth cycle, the liquidity cycle, the effects of deregulation efforts, and (now) the significantly decreased bullish crowding in risk assets demonstrates that the risk of a market crash/ recession this year is low. Q1 earnings season begins this week, and the earnings & guidance given by these companies will help paint a clearer picture on the war’s effect on solid companies.
Week 15 (April 12 - April 18): See Flagship weekly report
Week 16 (April 19 - April 25): See Flagship weekly report
Week 17 (April 26 - May 2): See Flagship weekly report
Week 18 (May 3 - May 9): See Flagship weekly report
Disclaimer: Past performance of the Wolff Funds or its manager is not indicative of future results, and no assurance can be given that investment objectives, including targeted returns, will be achieved. Investing involves significant risks, including the potential loss of principal, due to market volatility, economic shifts, and sector-specific uncertainties, particularly in high-growth areas like AI, healthcare, and digital assets. Forward-looking statements, such as market outlooks or performance goals, are based on current assumptions and subject to change without notice. Investors should carefully review the fund’s description and consult with a qualified financial advisor to assess suitability based on their risk tolerance and objectives. The Wolff Funds and its affiliates disclaim liability for any losses arising from investment decisions.