The GRIP framework
I start with big secular mega trends I think will drive investment returns over the long run, then read them through a shorter-term, cyclical view of the economy. That cyclical view is the GRIP framework, an acronym.
G is growth. I am not calling a recession or making predictions. I measure the things that usually lead to growth: leading economic indicators (the Conference Board index is a classic example), financial conditions, the housing market, real wages, and personal consumption expenditures - what people are actually spending. Together these tell me whether growth is speeding up or slowing down.
R is risk appetite. I use many measures, both price-based and relative-strength-based. I "arm wrestle" asset classes against each other to see what is rotating, what is breaking out and showing strength, and what is weak. That tells me whether the market confirms the growth picture or says something different, and whether it hints at inflation.
I is inflation. Speeding up or slowing down? I lean on market-based measures: Brent crude, gasoline prices, and the ratio between Treasury inflation-protected securities (TIPS) and regular Treasuries. Combined, these point to where inflation is heading.
P is policy. Inflation feeds into the policy read: how the Fed is positioned, and whether we are still in fiscal dominance, where money printing is the path of least resistance. That shapes what happens to asset classes and returns.
Three mega trends, with the US in the lead
I see three trends shaping long-term opportunity, and the US holds a strong strategic advantage in all three.
Deglobalization. COVID made this hard to unsee. The US is reindustrializing: more redundancy, supply chains moving, onshoring and nearshoring. That favors US infrastructure and real assets.
Technological disruption, mainly AI. In AI there is no second place. If you are not first, you are last, so the US has to focus on dominating it. The real constraint is physical. We have underinvested in metals and mining, especially copper. A data center needs about 50,000 tons of copper on average, and about 27 tons of copper per megawatt on average. We now realize we must spend heavily to fix this.
Fiscal dominance, or money printing. That spending leads straight into this third trend, and the money printing is not going to stop. So I want structural allocations to inflation hedges.
Why this regime is different
The setup now differs sharply from the years after the global financial crisis (GFC). Back then the backdrop was deflationary with low rates. You could run quantitative easing at almost any point to juice the market through the wealth effect. That produced a K-shaped economy, where the top 10% now account for 50% of consumption. I think that is shifting, and the regime shift opens up opportunities.
Best-positioned companies
SpaceX. Think about the energy bottleneck in AI and the value of companies that vertically integrate around it. SpaceX is controversial right now, but I view it as one of the premier vertically integrated power and AI infrastructure plays that exists. Many people underappreciate that edge.
Apple. Software is about to have a hardware problem, as Elon Musk put it. Apple sits in a strong, unusual spot to capitalize on that infrastructure and hardware angle. Its ecosystem can become the best vertically integrated consumer-based AI company.
Eli Lilly. Biotech is having its moment, a point Anthropic's CEO made a few weeks back. Biotech, pharma, and healthcare have all broken out to fresh all-time highs. Eli Lilly holds a proprietary data set going back 150 years and has a thousand Nvidia Blackwell GPUs testing on that data. That data moat is very real. I expect faster product delivery and drug development. Applying AI across biology - biotech, pharma, and healthcare - is creating major opportunities in companies like this.
