The Weekender is my bi-weekly take on macro shifts and emerging themes. It’s not investment advice — or even our firm’s official view. I aim simply to inform, challenge, and maybe entertain. If you’d like this in your inbox every other Saturday morning via Northern Trust, subscribe to The Weekender.

Trust is a scarce commodity — in relationships, in business, in geopolitics. It surfaced repeatedly at Davos this week, and what’s clear is that who and what we trust is shifting. Markets increasingly favour the tangible (gold, commodities) over the intangible (fiat, currently also bitcoin). Society mirrors this drift: Trust in institutions is eroding, replaced by something smaller, more local, more personal.

The latest Edelman Trust Barometer underscores this: 70% of people globally say they hesitate to trust anyone who holds different values, views or information sources. Trust has moved from We to Me. Personal networks now outrank institutions in credibility — an extension of the peer‑based trust structures we saw explode during COVID‑19. This helps explain the gravitational pull of social media. And nationalism. And echo chambers of all flavours.

For investors, these shifts matter. Fragmentation isn’t just geopolitical — it’s financial. As I mentioned in Back to Britain and Asymmetric Beta in 2024: As the world fractures, so may global allocations. If you want exposure to the rich opportunity sets in the UK, Japan, China, or Australia? You may not find them in the ACWI Index.

New Ideas, Old Books

In our note Back to Britain, we referenced John Plender’s 1982 book That’s The Way Money Goes. Alongside an International Monetary Fund (IMF) report from the 1980s, it was one of the few sources that offered a framework for understanding what happens when system‑level trust erodes and inflation volatility rises. To replay a prior line: “Price is signalling a regime shift” — one that favours the material over the ethereal, supply over demand, sellers over buyers and perhaps the rest of the world over the U.S. A mean reversion that rhymes more with the 1970s than the 2010s. Plender reminds us that in that era, the U.K. outperformed the U.S., hard assets like gold, commodities, fine-art and farms surged, and long‑duration bonds became known as “return‑free risk.”

In that same IMF report, central bank gold reserves were roughly double (43%) what they are today — a data point worth sitting with.

Moral of the story: If you want new ideas, read old books. Or old IMF reports. Or — if you prefer something more digestible — our latest Capital Market Assumptions (CMA) report.

Australia: (Frustratingly) Brilliant

Australia is annoyingly good at cricket. It’s also world-beating at producing real returns. According to the Global Investment Returns Yearbook by UBS, over 120 years to 2024, it has delivered a 6.43% annualised real return in USD, edging out even the U.S. (6.38%). Not bad for a nation known more for its googlies, gum trees and goannas.

The brain trusts behind our CMA process is genuinely exceptional — not just at number‑crunching, but at integrating structural themes like demographics, debasement, deglobalisation and technology into their thinking. This year, their highest‑conviction public equity market is Australia (presumably they didn’t have the New Zealand data…), followed by Japan and the U.S.

Australia sits at the nexus of several mega‑forces: the AI capex supercycle, the commodity supercycle, geopolitical supply chains and the new scramble for strategic materials. It has inbuilt tolerances to debasement. It is close to fast growing, and commodity intensive markets like India and, of course, China. You can’t build AI infrastructure without copper, aluminium or nickel. You can’t secure your defence force without rare earths. You can’t run an energy transition without silver or natural gas, uranium or lithium. And you can’t hedge debasement without scarce, non‑replicable assets. Assets which Australia has in abundance

Extraction economies tend to outperform when scarcity and sanctioning is evident. This theme, therefore, may continue, even if the current geopolitical regime does not. 

Debasement

As money supply expands alongside aging demographics (more retirees = more fiscal transfer = more issuance), investors must understand the risk: If an asset can be created faster than the currency it's priced in, it will lose real value. That’s debasement. Our lowest‑conviction asset within our CMA? Japanese bonds. Persistent inflation pressures, rising issuance and still‑negative real yields create a tough setup. Higher (real) yields are required to attract buyers away from U.S. Treasurys. The twist: Japanese equities look meaningfully better. They carry stronger inflation credentials, emerging supply discipline and rising shareholder returns.

Japan: Risk and Return

Volatility this week centred around the Greenland issues and Japanese government bond (JGB) yields spiking on fears that renewed government spending would widen deficits. But by mid‑week, those concerns eased: Expectations of more constrained spending, plus reminders of Japan’s interventionist history, helped calm markets. The Bank of Japan has a long record of stepping in when volatility becomes unhelpful. Add to these expectations for higher base rates (to tighten liquidity) and steady growth (to contain deficits), and by Thursday the panic had faded, although we shouldn’t become complacent and must continue to monitor these risks.

Equities tell a different — and more constructive — story.

Listed Japanese companies are set to pay over ¥20 trillion in dividends for FY25, a record, with payout ratios approaching 40%. Nearly half of companies plan dividend increases. More than 300 have revised forecasts upward.

Japan carries risk — but the return engine is warming, suggesting Japan stock markets is still, a Young Bull.

Innovation as an Asset Class

Money supply has grown roughly 7% annually over the past two decades. Only a handful of assets have cleared that real‑return hurdle: gold, U.S. tech and Sydney waterfront property among them. But if the trend persists, the investable universe of “real” assets will broaden — as it’s already doing with commodities and potentially housing. But hedging isn’t the cure. Productivity is. With productivity at 3%, U.S. debt to gross domestic product (GDP) ratio collapses below 80% according to Congressional Budget Office estimates. And leaders like Scott Bessent, Rick Rieder and Kevin Hassett argue that outcome is increasingly plausible — because innovation is compounding. Which brings us to venture capital within our CMA, our highest‑conviction private asset class. “Innovation as an asset class” is not a slogan — it’s a pipeline. And with likely high‑profile IPOs (SpaceX, Anthropic, possibly OpenAI) and a wave of defence‑tech listings in Europe and beyond, exit liquidity looks poised to improve.

MAAA and the Main Street Pivot

The Trump administration is pivoting hard toward Main Street ahead of the midterms. The theme is affordability. The precedent is Nixon 1971 (where freezing prices improved the cost of living and his approval ratings…for a time, ahem). The tactics range from boosting rental supply (deporting illegal immigrants) to deregulating power infrastructure (see the Speed Act), nudging Microsoft into funding grid upgrades, lowering food import tariffs, pushing for lower oil prices (“Drill Baby, Drill” and Venezuelan access), and student loan relief via a temporary pause in involuntary collections. Now they’re aiming at housing. Not to make it cheaper — that would erode wealth effects — but to make it more liquid. More accessible. Another supply‑constrained asset about to receive policy attention. And possibly more demand.

Fix Housing, Fix a Lot of Things

Housing was a key — if understated — theme at Davos. U.S. President Donald Trump argued too many Americans have been locked out by high mortgage rates and investor activity. Policy responses on the table include:

• Instructing the mortgage agencies to buy securities

 

• 50‑year mortgages to reduce monthly payments

 

• Portable mortgages to unfreeze labour mobility

 

• Curbing corporate home ownership

 

• Reforming small‑bank mortgage pipelines

 

• Adjusting student loan rules to prevent credit‑score impairment

 

• And, most powerfully, a proposal to allow withdrawal from 401(k) accounts to fund a down payment

It’s no surprise homebuilder stocks have stopped falling despite poor data. When stocks rise on bad news, that’s often a bullish sign.

A sign for improved construction, improved collateral values and wealth effects (every new home adds 3.1 jobs), and maybe even, improved confidence?

Fixing housing can fix a lot of things.

Small Caps Signals

TSmall caps are perking up. Highly sensitive to rates, cyclicality and margins, they amplify economic inflections. Their recent breakout — rare in the past two decades — comes when valuations vs. large caps are at multi decade extremes. This may suggest mean reversion may only be beginning. And the right tail of U.S. GDP growth is getting fatter.

Micro Is Macro

Semiconductors (the SOX index) continue to lead — an important tell given their role powering the AI industrial cycle. If AI were a bubble, you’d expect the enablers to crack first. Instead, they’ve hit all‑time highs. Think of transports during the Industrial Revolution and Dow Theorists obsession with the Transportation Index (TRAN). Today, semis are the transports. Where they go, the market tends to follow. They reflect the health of customers who collectively hold immense market capitalisation suggesting concentration could be a feature — and not a bug of this AI revolution.

In other words, micro is macro. And micro just made a new high.

Perhaps that’s the signal we should trust.