Core Viewpoint - The article discusses the transition from the "Anything But Bonds" (ABB) trading strategy to the "Anything But The Dollar" (ABD) paradigm, indicating a shift in market dynamics and investment strategies [1]. Market Expectations - The market is closely watching the upcoming Federal Reserve meeting, with expectations of at least a 25 basis point rate cut, which is perceived as credible amid a backdrop of accelerating U.S. economic growth [2]. - The current market reaction suggests a resurgence of risk parity strategies, breaking through highs for 2024 [2]. Asset Performance - Year-to-date, asset performance has shown significant divergence, with gold leading at a 38% increase, outperforming global equities (25%) and Bitcoin (23%) [4]. - In contrast, the dollar and oil have been the biggest losers, down 10% and 13% respectively, supporting the view of a weakening dollar [5]. Economic Growth and Market Trends - Hartnett predicts that U.S. nominal GDP growth, which surged by 54% since 2020, will peak in 2025, slowing from a 6% annual growth rate to 4% due to weakening government spending and labor market conditions [9]. - The peak in nominal growth typically signals a peak in bond yields, suggesting the end of a prolonged bear market in bonds by 2025 [13]. Investment Opportunities - The end of the ABB trading cycle is expected to benefit long-neglected, interest-sensitive assets such as small-cap and value stocks, which are currently at near-historic low rolling return rates compared to large-cap stocks [14][13]. - Hartnett emphasizes the importance of embracing the ABD theme, advocating for investments in non-dollar assets, particularly in international markets, as the dollar weakens and fiscal expansions occur in Europe and Japan [16]. AI Bubble and Credit Market Risks - While AI remains a bright spot in the market, there are risks associated with the rapid increase in capital expenditures for AI, which have surged from 35% to 72% of cash flow in 2023 [18]. - The technology sector's credit spreads are at their narrowest since 1997, indicating a lack of concern among credit investors regarding the risks associated with the AI sector's spending [20]. Policy, Profits, and Political Landscape - Hartnett uses the "PPP" framework to analyze the current situation, noting that the Fed's anticipated rate cuts are seen as preemptive, which has led to a narrowing of credit spreads and a rise in interest-sensitive stocks [24]. - The labor market is weak, with an average of only 64,000 new jobs added monthly over the past six months, but this is offset by a strong "K-shaped" wealth effect [25]. - Political risks are rising due to populism, high inflation, and significant wealth disparity, which may lead to policies reminiscent of the early 1970s aimed at reducing unemployment while controlling inflation [27][28].

Core Viewpoint - The market paradigm is shifting from "Anything But Bonds" (ABB) to "Anything But The Dollar" (ABD), driven by the peak in U.S. nominal GDP growth, leading to a weaker dollar and a return of the bond bull market [1][3][12] Group 1: Market Trends - The anticipated end of the ABB trading logic will occur as nominal GDP growth in the U.S. is expected to peak in 2025, slowing from 6% to 4% due to weakening government spending and labor market [9][12] - Major asset performance has shown significant divergence this year, with gold leading at a 38% increase, while the dollar and oil have declined by 10% and 13% respectively, supporting the view of a weakening dollar [5][12] Group 2: Investment Strategies - The new investment theme for 2025 is ABD, suggesting a focus on non-dollar assets as the dollar weakens and fiscal expansion occurs in Europe and Asia [13] - Gold is highlighted as a strategic asset for hedging against risks of government instability and dollar depreciation, with expectations for further price increases [13] Group 3: AI Bubble and Credit Market - The capital expenditure for AI is rapidly increasing, with spending on data centers rising from 35% to 72% of cash flow, indicating a growing reliance on debt financing [14][16] - The credit spread in the tech sector is at its narrowest since 1997, suggesting a lack of concern among credit investors regarding the risks associated with the AI sector [16] Group 4: Policy, Profits, and Politics - The market perceives the Fed's rate cuts as preemptive, which has led to a narrowing of credit spreads and a rise in interest-sensitive stocks, but caution is advised if certain market indicators reverse [19] - Weak labor market conditions are being offset by a strong wealth effect, with significant increases in household equity wealth projected for 2024 and 2025 [20] - Rising populism poses social risks in the U.S., with high inflation and unemployment potentially leading to policies reminiscent of the early 1970s, which could further support gold and cryptocurrency prices [21]