From Cold to Warm: Positioning for the U.S. Economic Cycle
Tripled Since 2023: How Our Portfolio is Beating the Market
📊 The Seasons Ahead
Stepping out of the office and onto the streets of New York, the scene is unmistakable: leaves falling, autumn winds cutting through the air — the northern hemisphere has entered its colder season. Alongside the change in weather, we find the U.S. economy showing a similar chill. More particularly, in light of the recent data, we find the following roadmap of the U.S. economy compelling: the US economy will likely first cool, then heat up again.
Cold (2025): The Winter Phase
Payroll revisions now suggest net job losses, and long-term unemployment has risen to levels historically associated with recession. Real income and consumption growth have slipped into the bottom 30th percentile and continue to decelerate, while tariffs and the Treasury cash rebuild act as a fiscal drag. Nominal income growth of ~4% is holding the economy just above recession, but the trajectory is weakening.
Warm (2026): The Spring Thaw
Just as every winter gives way to spring, the U.S. economy should warm again by 2026. After rate cuts, a Fed under Trump’s influence could find it even harder to tighten again. Fiscal expansion from Trump-era initiatives and the OBBB impulse, lower Fed funds, and renewed private credit growth are set to reignite nominal GDP. The Fed, politically constrained, may allow inflation to run hotter without tightening aggressively.
*The One Big Beautiful Bill Act (OBBB) is a U.S. federal law signed on July 4, 2025 (Public Law 119-21), representing a major package of tax cuts, spending changes, and policy reforms.
What does the market say：
But which of the months does the market find itself in? It would appear that the market is still in its midsummer night’s dream.
Cyclicals have outperformed defensives by ~40% annualised, high-beta currencies (HUF, ZAR, BRL) are ahead of CHF and JPY, and SOFR options only price a 26% probability of recession — well below the 35%+ that would indicate markets are “fully priced.”
Any risks?
Strong Q2 2025 earnings suggest US corporate resilience. The “cold” leg may not materialise:
High-frequency data could surprise to the upside.
The market migh feel like the Fed has got its back and reject the “cold” narrative despite the fundamentals realises.
Asset Implications
Given the above, we think the following asset implications are interesting:
At the asset allocation level, we see the current stage as a transition point from “cold” to “hot”, and therefore adopt a dual-track strategy.
On the one hand, in the near term, we continue to favor defensive U.S. companies with strong balance sheets and diversified global revenues, while maintaining long positions in front-end rates (such as SGOV, SONIA) and selectively extending duration as a tactical hedge against policy surprises and market volatility.
Gold serves as an important anchor in this phase, acting both as a hedge against fiscal dominance and as a protective asset amid geopolitical risks.
On the other hand, looking toward the mid term, we are gradually re-risking into higher beta assets, including small caps, financials, and cyclical commodities and energy plays.
Historical precedents in 2011 and 2021 suggest commodities tend to perform strongly in similar macro environments. Given expected curve dynamics, we prefer steepener positions: short-end rates may remain anchored under a Trump-led Fed, while fiscal dominance drives the long end higher. In such an environment, cyclical stocks, commodities, and value-driven opportunities should become more attractive, though investors should also anticipate significantly higher volatility.
Allocation in Motion
At Genuine Impact, our portfolio isn’t just surviving — it’s compounding. As of 12 September 2025, the Global Equity Portfolio has delivered a +4.44% gain over the past month alone. More importantly, since rebasing in 2023, the portfolio has grown from an index level of 100 to 300, representing a +200% cumulative return.
This isn’t luck — it’s the result of disciplined positioning, forward-looking allocation, and consistent risk control.
Meta & Alphabet: We increased exposure by +2.5% each in August (twice), bringing them to ~10% of the portfolio. These names combine fortress balance sheets with global customer bases, benefiting directly from USD weakness. Trading at ~21x and ~27x PE, respectively, they remain more reasonably valued than peers while offering outsized AI-driven upside.
VIX: We trimmed from 9% → 5% at the end of August, locking in the benefit of earlier hedges while optimising the cost of protection.
Rotation into Gold: On 11 September, we cut -4% from Chinese tech (KWEB) and added to gold. With China’s tech sector stuck in a price war, gold offers cleaner defensive qualities in a world of fiscal dominance and geopolitical volatility.
The full portfolio holdings are shown below: