An interesting disconnect appears to have emerged in recent weeks pitting some softer economic data against a generally resilient stock market.  On the surface, it would seem the economy is grappling with continued labor market unevenness (and, in turn, concomitant consumer weakness) made worse by the nearly six-week U.S. government shutdown.  Moreover, while it has the potential to be massively stimulative, the OBBB legislation, passed last July, was drafted (for whatever reason) in such a way that the stimulative impact is largely delayed into 2026.  While ~$100 billion in corporate tax credits are budgeted to take effect in 2025, ~$135 billion of additional corporate credits and more than $150 billion of consumer tax incentives have yet to ween their way into the economy.  Most importantly, the later will come in the form of refund checks to American taxpayers that will not be cut until the April filing window – halfway through 2Q.  That’s roughly five months from now. At the center of this unevenness prices for the goods and services we need continue to outpace the growth of wages. We showcase this divergence in the chart below using Strategas’ Common Man CPI, an alternative inflation measure rate of prices for the goods and services we want versus U.S. average hourly income. All of this is real, tangible, and gnawing at the consumer sentiment.

Source: Strategas, BLS, Haver through September 2025

While this timing gap weighs on consumers’ minds and plays tricks on the economy in 4Q’25, investors are looking straight through and into 2026. The market has been bullied (in the Rooseveltian sense) by continued strength in corporate profits – remember the economy and the stock market are not the same; Y/Y earnings growth is running at +13.5% in 3Q’25 with top-line at a robust +8% Y/Y – case in point: roughly twice the rate of GDP growth in the quarter.  And operating margins have continued to expand from 2Q’25 tariff tantrum-related levels. What is more, the Street has increased its already healthy outlook for 2026 revenue and profit growth to +6% and +14% Y/Y respectively, undeterred by even an ounce of managements’ proclivity to soften the outlook through the traditional “underpromising” associated with turn-of-the-calendar guidance. Said another way, corporate operators remain bullish on their own prospects for next year.

Source: Strategas Securities as of 11/13/2025

We remain bullish in the short-to-intermediate term though we are braced for further choppiness into year-end as this period of moderate disconnect between an economy, weathered by a 4Q’25 soft patch, and an equity market, buoyed by lofty AI expectations and broad earnings strength, plays itself out into the waiting arms of U.S. government stimulus checks.

Regular readers of our work will know that we believe identifying sleeves of thematic momentum to be the most effective access point of investable outcomes derived from macro analysis.  Strategas manages a suite of three exchange traded funds designed to provide exposure to these themes.  Each fund is focused on a distinct time horizon and macro opportunity set, a one-to-one reflection of the Firm’s research-driven outlook: the Strategas Macro Momentum ETF (SAMM) focuses on the catalysts moving the markets in the short-to-intermediate term; the Strategas Macro Thematic Opportunities ETF (SAMT) is focused on intermediate-to-longer term themes driving the economy; and, the Strategas Global Policy Opportunities ETF (SAGP) leverages a factor-driven approach to invest in the super-cyclical implications of policy outcomes.

Looking into 2026, we continue to see five themes with sufficient thematic momentum to warrant inclusion in our Macro Thematic Opportunities portfolio:

1. Cash Flow Aristocrats – companies with the ability to self-fund, particular in periods of economic uncertainty.
2. Artificial Intelligence – the investable focus of which is shifting, in our view, beyond the hyper-scalers and to a period defined by “agentic productivity.”
3. The Industrial Power Renaissance – answering the need for America’s (and the World’s) insatiable demand for electricity to turn things on, to make things we want and to ship things where we need and want them.
4. De-Globalization – understanding the implications accruing the breakdown and fracture of long-held and long-relied upon geo-political operating conventions.
5. The 2026 Consumption Wave – fueled, in no small part, by billions of Dollars of tax credits and refunds, the build-up to the FIFA World Cup and America’s celebration of the 250^th anniversary of the Declaration of Independence.

Most investors focus their attention on, or at least more aware of, developments within “definite” time horizons. Easily conceptualized points in the future that we can all anticipate and will knowingly arrive to at the same time – tomorrow, next week, next year. News and information relevant to these definite dates can overwhelm the senses and disproportionately focus our attention on them.  They are not unimportant and as we note above have important implications for our portfolio.  But beyond these lie the “indefinite” horizons that mark personal, psychological, and social milestones – marriage, home ownership, retirement – that often represent the cornerstone of our financial planning goals.  A key to arriving at these indefinite destinations on time and in the desired financial condition is to have a plan flexible enough to both avoid land mines and to capitalize on opportunities across the definite horizon plain while keeping our antennae tuned for trends with longer and more potentially severe implications for our tactical asset allocation scaffolding if we do not course correct along the way.

Inasmuch, there is a second disconnect investors should keep an eye on as we look beyond the horizon of this business cycle. Despite the ostensible short-term boost to the economy and the market on the heels of the OBBB tax cut, it is difficult not to harbor some concern for the effects that will manifest from the United States’ legacy of fiscal profligacy and that of its citizen spenders. This concern is not new, of course; questions about deficit spending and the persistent rise of debt levels have been a regular feature of client conversation for years. So, what is the problem? How should we think about it? What changed? And, how, if at all, should we adjust our portfolio allocation to accommodate?

The problem is debt – government debt, corporate debt, private debt, consumer debt, all of it.  At a point – and that point is hotly debated[1] – the debt level and more importantly the interest carry on the debt becomes too high to service while maintaining requisite levels of saving and investment necessary to keep the economy expanding. As debt service consumes a greater share of economic output, the degree of difficulty to dampen or reverse this trend increases exponentially. Said another way, there are more desirable mechanisms to solving this problem but the greater the burden the more difficult-to-impossible it becomes to manage in proportion to (or against) market forces that can result in less desirable and exogenous outcomes.

The natural and binding constraints of economic equilibrium would provide for Debt/GDP relief to come from one (or more) of four mechanisms, ideally – for the debtor – to be managed in controlled combination: 1) Productivity Growth – the most desirable; 2) Population Growth – though given declining global birth rates and increasingly nationalist immigration policies, particularly in the west, perhaps a relic, in aggregate, of periods defined more by imperial overreach; 3) More  Taxes and/or Less Spending – the policymakers’ dilemma; and, 4) Inflation – the least desirable.  Without being too stark, an inability to manage this equation or respond to its imbalance has toppled empires. Countries that have enjoyed the “exorbitant privilege” of being the global reserve currency in their day have seen this status erode because they lost at war, were over their skis fiscally and unable to service their debt while maintaining economic growth. When a country loses its reserve currency status, the effects are broad, slow moving, and structural. Those that deign to suggest it is even possible will caveat by saying, ‘it does not happen overnight,’ and it doesn’t, but the consequences are very real…

1. Higher borrowing costs – to adjust to eroding demand for government debt interest rates must rise to attract capital but the tail effect results in an even greater debt service burden.
2. Currency Depreciation – when investors are not clambering for your bonds the demand for the currency also wanes creating domestic inflationary pressures.
3. Inflation & Higher Cost of Living – weaker currency results in higher import prices and a decline in consumer purchasing power.
4. Loss of Geopolitical Influence
5. Domestic Standard of Living Falls – this is not to suggest that the citizenry cannot still make a living, be healthy and wealthy, enjoy a wonderful quality of life and bequeath the same to their children, but on balance the ability to indefinitely consume more than you produce ends.
6. Capital Outflows & Reduced Investment
7. Fiscal Austerity

That’s pretty dire. ‘It couldn’t happen to us!’

Remember, the common denominator is war and debt. Prior to Russian’s invasion of Ukraine it would have been difficult for our team to put into words or conceptualize De-Globalization as an investable theme. The building blocks of a multi-polar world were certainly there. But disparate and seemingly unrelated developments on the macro landscape did not naturally present as related. The Covid pandemic and the Russia-Ukraine war certainly revealed the fragility of Trade Relations & Supply Chains. Brexit and Trump’s improbable political rise behind a global sweep of nationalism suggested Natural Resource Procurement & Energy Security and Defense Alliances & Re-Arming would become focus sectors. OpenAI’s release of ChatGPT rocketed A.I. into the lexicon and set off a geopolitical arms race upending the long relied upon status quo of R&D, Tech Alignment & IP Sharing. The players were on the field.

What changed? We suspect when the historical reflection is taken, investors will look back and point to the G7/EU’s freezing of Russia currency reserves as the “Franz Ferdinand” moment that shifted the spirit of the forty-year Technology Revolution – GUI & Personal Computing 1983-95, Connectivity & Commerce 1995-2001, Mobile 2006-2017, the Content Wars 2013-2024 – and the emerging A.I. segment into a theatre of hostile conflict pitting the U.S. and its allies in the geo-political west against China, an axis of emerging economies and non-state economic participants in the geo-political east.  The connection… China is matching – and in some areas, surpassing – U.S. domestic and foreign direct investment in the global technology arms race. Cast as a national security imperative: a “war” we must win in both relative and absolute terms, leaves the U.S. with no choice but to materially increase spending and, in turn, its debt in an effort to maintain the status quo or squash our adversary on this new frontier.

But the battlefield is not just a function of who has the largest data centers, the fastest semiconductor chips, who can generate the most compute capacity, the best large language model, or generate the greatest productivity gain. Given the waxing dynamics of global nationalism and the G7/EU move on Russian reserves, China (and a battery U.S. trading partners – including G7 and EU allies) are tactically moving to “de-dollarize” their economies. That is, reduce their dependency on the U.S. Dollar. Many financial plumbers will argue the impossibility of that exercise. We know we’re not expert enough to argue every nuance of the argument but as market participants what are we trying to solve for?  Insisting that we're right or you’re wrong or inoculating our portfolio exposure against the triumph of perception over reality? If the actions of global central banks are any indication,   the premise posed above can help explain the intensity of investors’ interest in handicapping the relative probabilities of Artificial Intelligence delivering on its productivity promise versus the U.S. succumbing to an inflationary debt wave and to no less a degree, helps to explain the near-asymptotic bid to a broad array of “alternative” asset classes that have not seen residency in multi-asset portfolios in the post-ERISA era: gold & commodities, Bitcoin, land, mineral rights, energy, and real estate, to name few.

As we have written in the past, the proliferation of exchange traded products has created retail access points for these and other alternative assets previously more easily accessible only to institutional investors. We expect portfolio allocations to these alternatives will increase as investors increasingly course correct to indefinite time horizons. 

Nicholas Bohnsack