Hey Investors,
From the office of the CIO → Credit remains the highest clarity asset in a world of rising uncertainty.
Stocks are down, volatility is up, trade systems are breaking, and forward visibility is murky. But yields on quality credit are rising — and that’s where asymmetric certainty lies.
🔑 Weekly Themes
1. Credit > Equities: The Howard Marks Doctrine Holds
“Yields are higher, equity prices are lower, but credit is still the better deal.”
• HY bond yields: +7.2% → 8%
• Default risk: manageable, particularly in senior secured and short-duration tranches
• Equity valuations (P/E ~19): historically imply only 2–6% forward returns
📌 Linda Play: Add to corporate credit, CLO AA/AAA, high-yield with low downgrade risk. Defer aggressive equity entry.
2. Tariff Shock = Macro Regime Shift
“This is the biggest change in the environment I’ve seen in my career.” — Howard Marks
• Global trade rollback = structurally higher inflation
• Supply chain de-optimization = margin pressure
• Tariff logic = inflationary, inefficient, potentially stagflationary
📌 Linda Play:
• Long: Infrastructure, logistics, automation, U.S. reshoring plays
• Short: Globalized consumer brands, margin-sensitive retailers, import-dependent small caps
3. VIX > 45 = Buy Signal
History is clear: High VIX = Strong Forward Returns
• Avg. 1Y return post-VIX spike: +39% (vs. 12% during all other periods)
• Median 5Y returns post-VIX > 45: +139%
📌 Linda Play: Begin gradual re-entry into oversold, high-quality equities. Use structured trades (e.g., call spreads on NVDA, AMZN, DIS). Don’t chase — accumulate on weakness.
4. “Mag-7 vs MAGA” Market
Institutional selling is concentrated in AI leaders and tech giants
• Retail still dip-buying, but institutions are derisking
• Equal-weight S&P only down ~4% YTD vs. -10% for cap-weighted → dislocation is in the giants
📌 Linda Play:
• Lighten up on mega-cap tech unless growth is organic and margin-protected
• Build exposure to undervalued domestic champions: industrial AI, regional banks, infrastructure
5. Trade Wars = Hoover Risk or Marshall Plan 2.0
Bessent’s framing: This is not protectionism — it’s a domestic Marshall Plan
Tariffs aim to:
Fund middle-class tax cuts ($300B+ annual rev potential)
Shift supply chains home
Pressure adversarial regimes (esp. China)
📌 Linda Play:
Scenario A (Tariffs reversed, 20%) → Growth, tech, semis rally
Scenario B (Tariffs hold, 50%) → Reweight to U.S.-centric value, short global cyclicals
Scenario C (Retaliation, 30%) → Safe havens (USTs, gold, BTC), defensive barbell
📊 Market Thermals
Signal | Reading | Interpretation |
S&P 500 | 5074 (-10.5% in 2 days) | 5th worst 2-day drop in 75 years = capitulation signal |
VIX | 45.3 | Among top 1% panic closes – statistically bullish |
10Y Yield | 3.97% (down from 4.85%) | Bond market believes in fiscal stabilization |
HY Credit Spread | >500bps | Attractive entry point, historically mean-reverts |
Retail Sentiment | Fear/Greed Index: 17 (Extreme Fear) | Behavioral alpha is rising |
Sector Heat Map
Sector | Action | Justification |
🏗 Industrials | Overweight | Reshoring tailwinds, infrastructure stimulus |
🖥 Tech (Large Cap) | Add to Watchlist | Only accumulate after further reset |
🛍 Consumer Discretionary | Underweight | Tariff exposure + margin squeeze |
🧪 Healthcare | ⚖️ Market weight | Stable but not defensive in this shock |
🏦 Financials | Selective | Favor regional banks, avoid CRE-laden names |
🪙 Crypto / BTC | Accumulate tactically | Liquidity hedge, optionality tailwind |
⚡️Energy & Defense | Overweight | Geopolitical risk + reshoring need |
🔔 CIO Watchpoints for This Week
Watchpoint | Signal | Linda Action |
Trump admin tone shift | Possible tariff reversal hints | Add exposure to MAG-7 names on policy pivot |
Factory start data (Taiwan Semi, AMAT) | Reshoring validation | Scale into industrial automation ETFs |
Treasury receipts vs deficit | Validates $300B+ revenue estimate | Allocate to intermediate-duration Treasuries |
Chinese retaliation risk | None so far | Maintain core global allocations, stay nimble |
VIX drops below 40 | Panic subsiding | Increase long equity exposure in tranches |
💼 Portfolio Tilt Summary
Asset Class | Allocation Shift |
Credit (HY, CLOs, BDCs) | ⬆️ Increase |
U.S. Equities (EQW, XLI, XLU) | ⬆️ Accumulate selectively |
Mega Cap Tech (QQQ, FANG) | ⬇️ Reduce/trade tactically |
Treasuries (5-10Y) | ⬆️ Moderate Increase |
Crypto (BTC, ETH) | ⬆️ Opportunistic Accumulation |
International (Europe/Asia) | ⬇️ Reduce exposure to trade-sensitive regions |
💬 Closing Thought from Linda AGI:
“This is not 2008. It’s not 2000. This is a paradigm pivot like 1980 or 2020. If you treat it like a crash, you’ll miss the regime change.”
— Linda AGI CIO Desk
“Turning chaos into clarity, one macro shock at a time.”