FROM THE DESK OF STEVEN FELDMAN
OPEN POSITION
Is the resilience real — or just an exceedingly long deferral?
Martin Wolf, the Financial Times' chief economics commentator and a clear-eyed macro-observer, asked a question last week that must be on the mind of every thoughtful investor: How long can a resilient economy coexist with chaotic politics? Can the answer really be forever?
I do not think it can. But I will admit that so far, the answer is "well, it's still going — so forever seems like a perfectly fine answer." A closer look, though, would suggest that at the very least, you might consider hedging your bets.
Wolf was writing in the context of the IMF's latest World Economic Outlook, which now publishes not one forecast but three: a reference case, an adverse scenario, and a severe scenario. I believe that third scenario is new, and it tells you something about the world we are in and the range of possibilities. In short, the IMF is now hedging its hedges.
| "Before the war, the global economy was performing better than expected." — IMF World
| Economic Outlook, April 2026
The IMF's reference forecast has global growth at 3.1% in 2026 — below the 3.4% of 2024-25, and well below the 3.7% average of the pre-crisis 2000-2019 period. In the adverse scenario, growth slows to 2.5% and inflation reaches 5.4%. In the severe scenario, global growth drops to 2% and many territories find themselves in recession.
And yet, as Wolf notes, the US economy has remained stubbornly, almost perversely, resilient. Which brings me to what I think is the central investment question of this era, one I have been wrestling with in these pages for several years now: Is American economic exceptionalism a feature of the system, or a feature of extraordinary debt-financed can-kicking?
Seventeen Years Without a Real Reckoning
David Janny of Ameriprise recently reinforced in his monthly newsletter an astounding statistic that I have featured on numerous occasions. We are now 17 years removed from the bottom of the Global Financial Crisis, and in that span, US investors have experienced only two months' worth of recession. Two months. In seventeen years.
It just does not feel normal to anyone who understands economics. That is not how capitalism is supposed to work. But I do not think Adam Smith contemplated $39 trillion in accumulated US government debt, quadrupled from the $10 trillion we carried into the GFC, or the fact that these funds would be deployed methodically to prevent clearing mechanisms that markets require to function properly.
| Household equity allocations have now reached 45–49% of financial assets — higher
| than the dot-com bubble peak of 40.2% in 1999. Higher than any point in American
| financial history.
The data from the ground level is alarming to anyone paying attention. Retail investors poured $48 billion into US equities in 21 days earlier this year — at all-time highs. JPMorgan confirms retail sentiment has reached its highest level on record, surpassing even the meme-stock mania of 2021. Barclays shows individual investor exposure to stocks near the highest since 1997 — two years before the dot-com peak.
The pattern is consistent. When households pile into equities at record allocation levels, they are expressing maximum confidence at what history shows is exactly the wrong moment. This is not a controversial claim. It is simply what the data shows, every single time.
Why the Bears Have Been Wrong
And yet — to be intellectually honest — the bulls have also been right. And even setting aside the massive fiscal support the economy has enjoyed, there are other important structural reasons for this.
First: the private economy is more adaptive than the state. Companies can reroute supply chains, cut costs (mostly employees, which ironically gives politicians bad numbers to deal with — but the stock price pops!), automate functions, and reprice products faster than any
government can formulate policy. Political dysfunction is real and visible. Corporate adaptation is quiet and relentless. We tend to see the chaos more clearly than we see the response to it.
Second: American equity indexes are not random collections of companies. They are continuously self-curating organisms that shed the weak and absorb the strong. The S&P 500 of today bears little resemblance to the S&P 500 of 2000 — where have you gone, Sears? When capital concentrates into a handful of dominant, highly profitable, globally scaled businesses, the index can rise even while many people feel genuine strain. The index is not a company — picking any single company virtually ensures underperformance and volatility. And more importantly, the index is not the economy.
Third: technology has offset friction in ways that do not show up cleanly in GDP. AI and digitization have helped preserve margins and output despite higher rates, labor shortages, and supply disruptions.
Fourth — and most underappreciated — humans normalize chaos. What would have shocked markets for months in prior eras now moves prices for hours. That is not a sign that the risks have vanished. It is a sign that we have become deeply habituated living with them. We know the risks will pass, and if you do not believe that Wall Street will scream it in your ears.
| The index is not the economy. It has never been. But it also is not wrong — it reflects
| who wins when capital concentrates. The question is how long that dynamic holds.
So yes, I can support the case for American exceptionalism: the US capacity for corporate self-reinvention may be deep enough that the traditional recessionary clearing mechanisms matter less here than elsewhere. The combination of index mechanics, institutional inflows, and genuine innovation has created a floor that history genuinely cannot fully predict.
But I keep coming back to the $39 trillion question. Resilience built on debt is not the same thing as resilience built on productivity. Markets can be liquidity-driven, benchmark-constrained, and momentum-sensitive in ways that defer a reckoning for years — and then reprice it in weeks. We have seen this movie before: 2000, 2008, 2020, 2022. Each time the repricing felt sudden. Each time, in hindsight, fragility had been building for years.
How This Ends — and Why the Worst One Is the Quietest
When I think about how the tension between resilience and chaos resolves, I see three plausible futures. The market is currently priced for the first. I worry most about the third.
The optimistic path: resilience defeats chaos. Politics eventually moderates. Institutions prove sturdier than feared. Innovation drives genuine productivity gains. Debt gets inflated away gradually. Supply chains adapt. Markets were right to stay calm. This is a coherent scenario. I am not dismissing it.
The hard-landing path: chaos defeats resilience. Repeated shocks — energy crisis, fiscal accident, military escalation, a loss of reserve confidence — eventually overwhelm the capacity to adapt. Markets reprice abruptly. Recession. Credit stress. Multiple compression. This scenario gets the most attention — certainly the most clicks — and it may still arrive.
But the third scenario is the one I think about most, because it is the most insidious and the most underappreciated. Call it the slow erosion. No dramatic collapse. No clean victory. Just gradual decline. Institutions weaken incrementally. Debt compounds. Productivity gains accrue narrowly to the top of the distribution. Politics stays theatrical. Markets continue — maybe even rise — but real living standards stagnate for the many, and the financial system quietly becomes more fragile with each passing year. My friend and GBI partner, Dan Tapiero, likes to say that France has been declining for 400 years. Indeed, a delightful place to live and Paris is lovely in the spring, but a lousy place to invest or preserve your purchasing power.
| This scenario often feels stable in real time. It only looks corrosive in hindsight.
| That is precisely what makes it dangerous — and precisely why it tends to be the last one
| investors prepare for.
Mark Carney described this moment as an era of "rupture." Wolf echoes him. The IMF echoes them both. I too have been an echo (and sometimes a broken record), focusing on what rupture means for asset allocation rather than for geopolitics. The slow erosion scenario is, to my mind, the one most consistent with the structural forces in play: petrodollar erosion, compounding deficits, weakened institutions, a US foreign policy that now functions as a destabilizing rather than stabilizing force.
And yet — surprise! — Viktor Orbán lost an election last month. The world has not followed America into protectionism as fully as feared. The demand for cooperation and peaceful commerce persists. Not every domino has fallen. I will not pretend the upsides do not exist.
Building a Portfolio That Survives All Three
Here is the inconvenient truth: you cannot predict which of the three scenarios plays out. No one can. The timing of regime change is unknowable. Systems can remain resilient far longer than critics expect — and then change faster than optimists believe possible.
That is precisely why the answer is not "sell everything" and it is not "nothing matters." The answer is to build a portfolio that does not require perfection. One that survives multiple futures rather than betting on any single one.
In practice, that means real diversification — not the false comfort of owning fifty different stocks in the same overvalued index, but genuine diversification across asset types and the nature of what they represent.
It means gold and precious metals, which have been sounding an alarm that polite financial conversation often ignores. Gold does not care which of the three scenarios unfold. In the hard landing, it is a safe haven. In the slow erosion — the scenario I find most likely — it is the purest expression of a portfolio's defense against purchasing power destruction. Physical scarcity does not negotiate with debt dynamics.
It means real assets as a more significant part of your portfolio: copper, uranium, energy and transportation infrastructure, agricultural land, and other supply-constrained real estate. These are assets grounded in physical scarcity at a moment when cognitive work is being rapidly commoditized by AI. When intelligence becomes abundant, what remains scarce becomes disproportionately valuable. The paradox of the AI era is that it strengthens, rather than weakens, the case for tangible assets.
It means businesses with genuine pricing power and strong cash flow — companies that can pass costs through and generate returns regardless of the inflationary or deflationary environment. Quality compounders with fortress balance sheets.
And it means maintaining liquidity reserves: dry powder to deploy selectively when dislocations inevitably arrive. Markets that have been ignoring structural fragility for years have a habit of repricing it abruptly. Patience and liquidity are what allow you to be opportunistic when others are forced to be reactive.
| The goal is not to predict the future. It is to build a portfolio that does not need to.
The tightrope image resonates with me for exactly that reason. The question is not whether there is a reckoning — there is always a reckoning, eventually. The question is what form it takes, and whether you are positioned to survive and even benefit from it regardless of which form arrives.
But I will leave you with Wolf's question, because it deserves to sit with you: How long can a resilient economy coexist with chaotic politics?
My honest answer: longer than most people expect. And not as long as the current market seems to believe. The danger is not that the answer is obvious. The danger is that by the time it is, it is already too late to act on it.
Steven Feldman is the co-founder & CEO of GBI. This newsletter is for informational purposes only and does not constitute investment advice.