The post-COVID era of high government spending has ushered in a new economic paradigm. The elongated 10-year cycles of 1980-2020 are gone, replaced by shorter, more intense two-year bull markets followed by one-year downturns. This framework suggests we are currently in the early stages of a new up cycle.
Instead of a single, declared recession, various private sectors experienced individual downturns at different times since 2022. This out-of-consensus view suggests the economic cycle has already bottomed, explaining why stocks have rallied strongly since what the speaker calls 'Liberation Day' in April.
Despite the start of a new bull market, current 'frothy' conditions make a significant pullback likely. This should be viewed not as a threat, but as a normal occurrence and a buying opportunity. Near-term catalysts include escalating China trade tensions, stress in funding markets from quantitative tightening, and peaking earnings revisions.