Things Are Going to Get Even Crazier: The Macro Regime Shift | Andreas Steno Larsen

Episode Summary

Executive Summary: The conversation argues that markets are in a late-cycle macro and semiconductor boom, with inflation, oil, AI, and IPOs reinforcing each other. The guest sees rate cuts fading, bond yields rising, the long end steepening, and AI/semis still driving euphoria before a likely rollover in late 2026/early 2027. He also highlights India, Korea, and select supply-chain winners as relative beneficiaries, while warning of EM stress, consumer-product scarcity, and late-cycle IPO risk.

Main Topics: Late-cycle macro regime shift and Fed policy (Priority: 5/5): The guest says inflation has returned, making rate cuts less likely and leaving the Fed with room to stay neutral or slightly hawkish. He thinks the most likely base case is policy staying roughly sideways rather than easing. Semiconductor/AI cycle as the dominant equity engine (Priority: 5/5): AI demand is seen as creating persistent semiconductor pricing power, with the cycle still in a euphoric phase. The guest expects semis to rally further before rolling over late in the year or early next year. Bond yields, yield-curve steepening, and Treasury demand (Priority: 4/5): He argues a steeper curve and higher long-end yields are by design and not necessarily bad for risk assets, partly because foreign buyers—especially Japan—need U.S. yields to stay attractive after FX hedging. Iran/Strait of Hormuz as an inflation and risk catalyst (Priority: 5/5): The transcript treats the energy shock as temporarily contained but potentially severe if the Strait remains constrained into late summer. Oil, fertilizer, helium, and broader supply disruptions are central to the inflation view. Emerging markets: winners, losers, and the strong dollar (Priority: 4/5): India and Korea are viewed as relative winners due to growth and semiconductor exposure, while Brazil, China, and much of LATAM face a worse mix of weak commodity momentum and a stronger dollar. IPO wave and speculative excess (Priority: 4/5): A coming wave of IPOs, especially in AI, is framed as a classic late-cycle signal. The guest sees the market as potentially absorbing major new listings, but also recognizes them as a sign of cycle maturity. AI’s second-order effects on labor, goods inflation, and information quality (Priority: 4/5): Beyond tech stocks, AI is expected to affect white-collar work, logistics, legal, finance, and consumer goods supply chains. The guest also worries AI encourages people to accept outputs without checking the underlying process.

Key Arguments: The Fed is less likely to cut because inflation has re-accelerated and officials are drifting away from an easing bias. The current inflation shock is partly geopolitical and may fade if energy routes normalize, making a 'transitory' framing politically possible again. A steepening U.S. yield curve can coexist with strong risk assets and even help foreign demand for Treasuries, especially from Japan. AI is not just a beneficiary of inflation; it is also a contributor to it through semiconductor scarcity and pricing power. Semiconductors remain cyclical, but the cycle is not over yet; the most euphoric phase may still be ahead before a Q4/early-next-year rollover. Late-cycle IPO supply can cool speculative fervor, but current issuance is still not large enough by itself to derail the market. India and Korea are the EM exceptions because they benefit from re-exporting, Russian oil access, and semiconductor export strength. A strong dollar plus fading energy prices creates the worst setup for Brazil and other commodity-sensitive EMs. AI will first displace or reshape tech, finance, and legal work before broader labor-market effects show up in logistics and transportation. AI can weaken the quality of market and policy analysis by pushing participants to accept outputs without interrogating the process behind them.

Data Points: FedWatch December 2026 rate odds: 42.7% chance of a 25 bps hike, 30.3% chance unchanged, 21.8% chance of 50 bps higher - Host cites market pricing for the year-end Fed meeting Semiconductor cycle timing: Late 2026 or early 2027 rollover - Guest’s base case for the end of the current semiconductor upcycle 10-year Treasury yield view: 5% plus - Guest’s bottom-line call for the rest of the year 30-year Treasury yield view: 6% - Guest says this is plausible if the Fed keeps a wait-and-see stance Strait of Hormuz oil flow: 20 million barrels/day - Guest estimates typical oil volume through the strait before disruption Remaining balanced-energy window: 7 to 8 weeks - Guest’s estimate of how long the current global energy balance can hold China crude imports: Just under 6 million barrels/day below pre-war levels - Used to explain why global supply has stayed surprisingly balanced Japan 30-year yield move: Up about 4 percentage points in 2-3 years - Illustrates global steepening and pressure on foreign bond demand South Korea semi exports: Rising more than 200% year over year - Guest cites export data as evidence of semiconductor strength South Korea overall exports: Up 50% year over year - Shows semis dominating export growth Crypto/AI allocation: About 10% of portfolio - Guest says he has exposure to AI-related crypto-miner/cloud names Transportation and warehousing workforce: About 6 to 7 million jobs - Used to size potential AI disruption in logistics and transport Taxi/shuttle/chauffeur jobs in the U.S.: About 500,000 jobs - Used to frame the potential impact of robotaxis

Pivotal Quotes: "I think the semiconductor cycle will roll over towards the end of the year, early next year, but I think we have a euphoric part ahead of us before we get to that part." — Andreas Stino-Larson: Core view on the AI/semiconductor cycle "My key message going into this year is that it can become crazier than what we've already seen. And I think it will be a lot crazier before we turn." — Andreas Stino-Larson: Late-cycle exuberance and risk-taking outlook "The market is not on top of the scarcity that the current AI trade creates in consumer products such as desktop computers, iPhones, etc." — Andreas Stino-Larson: Underappreciated second-order effect of AI-driven semiconductor demand

Implications: Listeners should expect continued volatility, a stronger dollar, firmer yields, and more AI-driven scarcity effects before a likely late-cycle reversal. Investors may want to favor pricing power, supply-chain winners, India/Korea exposure, and avoid assuming IPOs or macro data mark the end of the boom yet.