Ernie Gray

The patience of investors who remained globally diversified and tilted to quantitative factors is being rewarded by a historic rotation.

The consumer credit crisis has created a lag in recession signals by temporarily inflating credit scores and spending power, masking underlying financial distress. Similar dynamics preceded the 2008 financial crisis, where easy credit defaults led to a sudden collapse of the bull market.

“Trees don’t grow to the sky,” they say. But there are substantial reasons to question whether the “new market” is like the old market, and redress its underlying mechanisms.

Will the underlying technologies of DeFi live up to the fervor and marketing hype, or will the technology inevitably be cast aside, a hollow shell of its ethos, living on in name only as its “brand power” is strategically co-opted by dominant interests?

While passive investing offers cost efficiency and broad exposure, its growing dominance may cause illusory distortions in prices and leave markets more vulnerable to abrupt dislocations when the tide turns.

A sector investing strategy is like a well-designed oil tanker navigating volatile seas. Just as an oil tanker is built with separate compartments to keep liquid cargo from shifting and destabilizing the vessel, a portfolio made up of sector ETFs can isolate risk and limit damage from downturns in any one part of the economy.