The Art of Investing

Our Outlook for 2026, With Stu Thompson

12 snips
Jan 2, 2026
Guest
Stuart Thompson
Stuart Thompson, an economist known for his macroeconomic insights, joins the discussion to share his outlook for 2026. He highlights rising Japanese bond yields and the unwinding of the yen carry trade, emphasizing potential global impacts. The conversation dives into the risks of persistent inflation despite expectations of a weaker dollar and higher commodity prices. Political volatility in the US and UK is also analyzed as a significant market force. Overall, it’s a thought-provoking exploration of what investors should consider in the coming years.
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INSIGHT

Competition For Capital From Higher Yields

  • Rising long-dated government bond yields create a competition for capital that can quietly pressure risk assets.
  • Markets may be complacent because consensus expects stimulus and lower rates, but higher long yields change that dynamic.
INSIGHT

Yen Carry Trade Reversal Risks

  • A reversal of the yen carry trade could repatriate huge sums to Japan and force higher yields globally.
  • When Japanese savers stop funding foreign markets, other countries must compete harder for capital.
ADVICE

Hedge With Yen And Manage Duration

  • Hedge portfolios by going long the Japanese yen against higher-risk currencies if you fear a carry unwind.
  • Consider reducing equity risk or use ETFs to express a yield curve steepening exposure if accessible.
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