A prominent macro strategist says investors should prepare for deeper market uncertainty and position portfolios defensively.
In a recent interview with David Lin, macro investor Luke Gromen says he believes the current environment calls for unusually high allocations to cash and short-term government debt.
Gromen explains that the starting point for navigating the current cycle is preserving liquidity.
“Obviously, setting aside gold, look, I think you want to have a far above normal allocation to cash and T-bills.”
He says that beyond holding cash, investors should focus on sectors where demand is structurally locked in and valuations remain reasonable. From a fundamental standpoint, Gromen says electrical infrastructure companies stand out as one of the clearest long-term themes.
“One way or another, we’re gonna be spending a lot on our grid. War doesn’t change that, rates don’t change that. Sort of nothing changes that, nothing stops that.
So to me, and the valuations on a lot of those industrial-related type infrastructure things like the PAVE ETF, PAVE, the GRID ETF, GRID… the companies that make up those ETFs, I think, are very well positioned. They’re not that expensive, and I think they’re gonna have very strong fundamentals for the next three to five years at least, if not more.”
Gromen also believes that markets may not yet be fully pricing in the level of geopolitical and macroeconomic risk that is building beneath the surface.
“There’s uncertainty now, no question. There is no uncertainty priced in, very, very little uncertainty priced in. I wanna see ‘Is this America’s Suez moment on the cover of Time Magazine?’ When I see that, that’s when uncertainty will start being priced in.”
His reference to a potential “Suez moment” points to the 1956 Suez Canal crisis, when Egypt nationalized the canal, triggering a military intervention by Britain, France and Israel. The confrontation shocked global markets, exposed shifting power dynamics in the post-war world, and marked a turning point in the decline of European influence in the Middle East.
Disclaimer: Opinions expressed at CapitalAI Daily are not investment advice. Investors should do their own due diligence before making any decisions involving securities, cryptocurrencies, or digital assets. Your transfers and trades are at your own risk, and any losses you may incur are your responsibility. CapitalAI Daily does not recommend the buying or selling of any assets, nor is CapitalAI Daily an investment advisor. See our Editorial Standards and Terms of Use.