Not a Time for Big Bets | Aahan Menon on What 60 Years of Regime Data Says About Today’s Market

**Jack Forehand** (0:02)
Welcome to Excess Returns, I'm Jack Forehand, and I'm joined today by, I think, the most feared person in the world of systematic macro, due to some of the boxing videos I've been seeing up on Twitter, our good friend, Aahan Menon.

**Aahan Menon** (0:14)
Hey Jack, great to be on. Thanks for the kind introduction.

**Jack Forehand** (0:17)
Yeah, I mean, I have to keep my questions nice and easy here, just in case I don't anger you based on some of those boxing videos because I see you putting up on Twitter.

**Aahan Menon** (0:25)
We don't have to take it anywhere else.

**Jack Forehand** (0:27)
That's true. Yeah, that's probably like that's not the type of stuff you want to translate into the macro world. No.
So you have a great deck for us today and we're going to work through as many of the slides as we can. Obviously, we have like 94 slides, I think we won't get through all of them. But what we want to do is we want to talk about, what I love about what you do is you are thinking about macro in a systematic way. I've been a systematic investor my whole career, and I think that's a really interesting way to look at this type of thing. So we're going to work from the top down, we're going to start at the high end of the economy, we're going to work down, and we're going to talk about some of the things you're seeing in the unique data you run. And I want to start with one of the things that's not on the slide right now, one of the things you had in the title of this is, Not a Good Time to Make Macro Vets, was one of the titles at the beginning of this presentation. I thought that was really interesting. So can you talk about maybe at a high level, we'll drill down later about why that is?

**Aahan Menon** (1:19)
Yeah, absolutely. I mean, definitely a few reasons, I think the most obvious and like intuitive one is just that there's a whole bunch of macro vol, right? Like there's a whole bunch of macro volatility. A lot of it is kind of just emanating out of the situation, Iran and the related effects on oil supply. So you have a really, really kind of in-fluclusive macro economic backdrop, which is impacting asset price trends, which is impacting policy. It's creating a whole bunch of volatility. And so most macro portfolios benefit from persistent trends in a direction. So asset costs may come together to price a disinflationary trend, a reflationary trend, just a pure asset price boom, a stagflationary trend. But all of these things require the individual macro parts to come together in kind of a decisive way and then create this big trend. And so macro payoffs look a lot like trend following payoffs in that way.
And when you take a step back and you look at today's dynamic, what you see is that you basically start to have the onset of a trend, and then you have some sort of news flow come out of the Trump administration that disrupts the trend, and then it resumes, and all of that type of thing. And so from that big picture kind of macro perspective, it's really hard to really make a very strong, concentrated bet that the economy or market prices are good at trend one particular way, and as a result, it's probably not in your best interest to construct a cross-asset macro portfolio that's very heavily betting on one direction.

**Jack Forehand** (3:00)
Yeah, it seems like humility is really important right now, and I think if you follow Twitter, you're seeing maybe the opposite of that to some degree. You're seeing a lot of people, like the tech people are thinking we're gonna have 8% GEP growth going forward, and then you've got a lot of the do-er people who are like the world's about to come to an end, and it doesn't seem like what you've kind of explained there is present in a lot of people right now, but it's important probably to take a step back and recognize we're in an uncertain environment.

**Aahan Menon** (3:21)
Yeah, I mean, Twitter is such an interesting microcosm, right? Like there's always one subset of FinTwitX, whatever, that's doing extremely well at the expense of another cohort, and there's this constant kind of back and forth, and I think there's a lot of grandstanding too, right? Like if you've recently been successful, you see people kind of touting their own success and things like that. But I think if you really kind of think about the path that you've had to go through to achieve the returns, even if you are an AI hyperscaler investor and all that type of thing, the path you had to go through this year to achieve whatever returns you had is by no means like a smooth one, right? And I think that just recognizing that, okay, you can look back and say that my total P&L has been amazing or whatever.