Synopsis : Ritesh Jain of Pinetree Macro highlights how central banks are losing influence to governments, marking the dawn of fiscal dominance in global markets. Investors should pivot towards liquidity-driven strategies, gold, and commodities as the world shifts from disinflation to debasement.
In a candid conversation with Mahesh Nayak, Ritesh Jain, Co-Founder of Pinetree Macro, warns that global markets are witnessing a fundamental power shift. The era of central banks steering the economic wheel is waning, giving way to fiscal dominance as governments drive markets and economic outcomes.
Jain points out that the Bretton Woods system is unravelling, with the US stepping back from its historic role of sharing GDP and maintaining global trade security. This retreat signals the decline of US financial exceptionalism and a diminished dollar stature, paving the way for gold’s return to the global trade system.
He underscores that post-pandemic policies have handed governments unchecked powers, making their actions more critical for investors than central bank policies. As a result, investment strategies should now align with government spending trends, fiscal stimulus, and liquidity injections rather than solely interest rate decisions.
If Western nations cut interest rates, Jain expects long-term bond yields to rise as markets demand higher risk premiums from heavily indebted governments. Bonds, in his view, are now “certificates of confiscation” as governments aim to keep interest rates below inflation, gradually reducing debt through financial repression.
On equities, Jain advises caution due to expected liquidity contraction driven by massive US borrowing but remains bullish on commodities, Latin America, energy, and non-dollar assets. The decline in the US share of global GDP could redirect liquidity towards emerging markets, creating new winners while the US sees a prolonged consolidation in mega-cap tech.
Market volatility, Jain notes, is the new normal as the old economic order disintegrates. Investors should embrace nimbleness, hold cash to seize opportunities during drawdowns, and prioritise assets benefiting from nominal GDP targeting.
Regarding geopolitical tensions, Jain suggests that regional conflicts often drive asset prices higher through post-conflict rebuilding and fiscal stimulus, cautioning only against escalations to nuclear conflict levels.
On the dollar’s future, Jain believes its dominance is eroding, aligning with the fate of past empires burdened by endless wars and debt. Gold is re-entering the monetary system as a neutral settlement asset for global trade, indicating a broader shift towards diversification away from the dollar.
Jain also highlights the global rate-cutting trend (excluding the US), with inflation remaining a looming concern for policymakers by next year. Hedge funds, he notes, are positioning towards Latin America, emerging markets, China, and commodities aligned with the global liquidity shift away from dollar-denominated assets.
As the global financial system moves from a disinflationary environment to a “debasement world,” investors must stay adaptive, liquidity-focused, and aligned with fiscal realities to navigate opportunities in the new macroeconomic landscape.
Disclaimer : This article is for informational purposes only and does not constitute investment advice. Please consult your financial advisor before making investment decisions.
