Excess Returns

📉 What the Market Is Getting Wrong | Liz Ann Sonders on Debt, Tariffs, and the Fed

In this episode of Excess Returns, we welcome back Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, for an in-depth conversation about what's really driving markets right now. Drawing on her latest research and commentary, we dig into retail trading dynamics, the implications of rising tariffs, the debt burden, inflation pressures, market concentration, and why the Fed might be holding the line. Liz Ann delivers clear, actionable insights—cutting through the noise and helping investors understand what matters most in today’s unstable environment.

📌 Topics Covered:

• Why high debt levels suppress long-term economic growth and productivity

• The retail trader “fingerprint” on recent market moves

• How sentiment extremes created a powerful reversal in April

• The rising risks around tariffs—and why markets may be complacent

• What companies are doing about margin pressure vs. passing on inflation

• The Fed’s “timeout” posture and why the market may be misreading it

• Liz Ann’s view on Powell’s potential ouster and Fed independence

• The disconnect between contribution to index returns vs. performance (Mag 7)

• Broadening market leadership and the role of quality stocks

• Why utilities and industrials are surprising AI beneficiaries

• How inflation is shifting from disinflationary to secularly higher

• The overlooked economic effects of immigration policy

• What the labor market is hiding beneath the headline numbers

• Why year-end price targets are a “dumb exercise” for individual investors

⏱️ Timestamps:
00:00 – Opening clip: debt, growth, inflation & the Fed
01:00 – Welcome and introduction
02:00 – Retail trader impact on market rally since April
05:25 – Sentiment washout and pain trade dynamics
08:00 – Policy instability and tariff complacency
12:00 – What investors can do in the face of uncertainty
14:50 – Budget deficits, debt burden, and growth implications
18:00 – Inflationary risks embedded in the new spending bill
20:30 – Dissecting inflation: tariffs, goods vs. services, and inequality
23:45 – Inflation vs. margins: where the impact shows first
26:00 – Instability vs. uncertainty: the new investor reality
30:30 – Labor market risks and misleading employment metrics
35:00 – Immigration's hidden macroeconomic effects
38:00 – Fed independence, Powell’s job security, and mispriced rate expectations
42:00 – Why the Fed may not cut—and why that’s bullish
44:20 – Mag 7 myth: contribution vs. true performance
48:00 – Broadening the rally: high-quality vs. low-quality stocks
50:30 – AI's second-order effects and sector-level surprises
55:00 – Liz Ann’s contrarian take: why year-end targets are pointless

Policy uncertainty is rising—but markets seem unfazed. In this episode, we sit down with Libby Cantrill, Head of Public Policy at PIMCO, to explore the critical policy risks that investors may be underestimating or ignoring altogether.

From the real-world implications of the tariffs to questions around Fed independence, fiscal stimulus, and housing market interventions, Libby provides an insider’s perspective on what’s happening in Washington—and why it matters more than the market suggests.

She also discusses how policy risk differs from macroeconomic risk, how investors often price the wrong factors, and why the next shock may not come from where most expect.

Topics covered include:

• Why policy risk remains underappreciated by markets

• The lasting impact of tariffs—and how they could evolve

• The Big, Beautiful Tax Bill: What’s real, what’s hype

• Risks to Fed independence and central bank credibility

• GSE reform and the political tightrope in housing

• The intersection of fiscal policy and market complacency

Whether you're focused on macro trends, portfolio positioning, or simply trying to understand what Washington might throw at markets next, this is a conversation you don’t want to miss.

Why didn’t the long-predicted recession arrive? In this episode, we talk with Aahan Menon, founder of Prometheus Research, about why traditional macro models are breaking down and what investors are missing in today’s economy. Aahan explains why recession indicators have failed, how monetary policy transmission has changed, and what really matters in understanding economic risk right now.

We also explore how Prometheus uses a systematic approach to macro investing, why focusing on the present is more valuable than forecasting the future, and what their models revealed about the true impact of tariffs—before the market reacted. If you’ve been relying on the old playbook, this conversation will challenge your thinking.

Topics discussed include:

• Why recession indicators failed to predict this cycle

• The real risk behind the Liberation Day tariff panic

• How the Fed’s rate hikes lost their bite

• What’s changed in the economy’s sensitivity to rates

• Prometheus’ approach to stress testing and forecasting

• How Aahan translates macro data into portfolio strategy

• The behavioral traps investors fall into during macro shifts

Billions are moving through the stock market every day—but not for the reasons most investors think.

In this episode, Brent Kochuba of SpotGamma breaks down the hidden world of options dealer flows and explains how concepts like gamma, vanna, and charm are silently shaping market behavior. Whether you’re a trader or long-term investor, understanding these behind-the-scenes forces is essential to making sense of today’s volatility.

We discuss:

• What dealer hedging flows are—and why they matter

• How options flows move billions without a fundamental trigger

• The role of gamma, vanna, and charm in stock price action

• Why expiration cycles often mark major market turning points

• Real-world examples: GameStop, Tesla, Nvidia, and the S&P 500

• What traditional investors miss by ignoring these dynamics

Even if you’ve never traded an option, this episode will change how you see the market.

In this episode, we speak with Luca Paolini, Chief Strategist at Pictet Asset Management, about the firm’s 2025 Secular Outlook and the unfolding shift in global markets. Paolini argues that the era of U.S. exceptionalism is fading—and investors may be mispricing what comes next. We discuss why the “Great Convergence” could redefine asset allocation, what it means for U.S. equities and the dollar, and why now might be the time to lean into bonds and income-generating assets.

Paolini also shares his views on inflation, tariffs, AI, private markets, and the challenges of navigating a low-return, high-risk world. Whether you're a global macro watcher or a long-term investor thinking about regime shifts, this conversation offers a roadmap for the next five years.

Topics covered include:

• Why the U.S. may no longer deserve its valuation premium

• How debt and protectionism threaten global growth

• Why the next five years could see converging returns across regions and assets

• The investment case for bonds, credit, and emerging market debt

• AI’s impact on productivity and equity concentration

• The future role of gold, crypto, and private assets in portfolios

In this episode of Excess Returns, Matt Zeigler and Jason Buck sit down with Eric Crittenden, CIO of Standpoint Funds, for a wide-ranging and candid discussion about trend following, risk transfer markets, and what it takes to build a resilient investment strategy for uncertain futures. Eric shares decades of hard-won insights on investor behavior, portfolio construction, performance pain points, and why blending passive equities with systematic macro might just be the future of asset allocation.

🔍 Topics Covered:

• The uncomfortable realities of trend following performance

• Why many investors misunderstand managed futures

• Eric’s view on the current drawdown and client behavior

• Setting expectations with empirical data and simulations

• The case for blending passive equities with trend following

• Capital formation vs. risk transfer markets explained

• What market participants get wrong about futures

• The surprising resilience of cap-weighted equity indexes

• The flaws in relying on bonds as diversifiers

• How regime shifts and correlation changes affect trend models

• Philosophical take on risk, regulation, and structural market design

Most investors chase yield. But what if the very models they rely on — from dividend screens to the 4% rule — are fundamentally broken?

In this episode, we’re joined by Ryan Krueger, co-founder of Freedom Day Solutions and manager of the MBOX ETF, to explore the overlooked truths of dividend investing. Ryan breaks down the importance of dividend growth over yield, why most dividend strategies ignore free cash flow, and how a disciplined sell process separates long-term success from failure. He also explains the concept of “Freedom Day” — a reimagined approach to retirement that’s built on income, not asset totals.

Whether you're a dividend investor, financial advisor, or retiree planning for long-term income, this conversation offers a fresh, practical framework you won’t hear elsewhere.

We discuss:

• Why dividend growth beats high yield over time

• The flaws in the 4% withdrawal rule

• How yield-on-cost changes investor behavior

• Red flags hidden inside popular dividend ETFs

• How “Freedom Day” redefines retirement planning

• Ryan’s quant + discretionary investment process

• The underrated power of sell discipline

• Why “never add to losers” might boost your returns

📈 Learn more about Ryan’s work: https://freedomdaysolutions.com

In this episode, we’re joined by Daryl Fairweather, Chief Economist at Redfin and author of Hate the Game, to explore the most dramatic shift in the U.S. housing market in over a decade. With sellers now outnumbering buyers by more than 500,000 for the first time since 2013, Daryl breaks down what’s really happening beneath the surface—and why so many homeowners and policymakers are reluctant to face it.

We dive into the behavioral and structural forces shaping the market today, from price stickiness and record cancellations to zoning reform and climate-driven migration. Whether you're a homeowner, investor, or policy wonk, this conversation offers a comprehensive look at what’s next for real estate in America.

Topics discussed include:

• The shift to a buyer’s market and why it matters

• The gap between seller expectations and buyer reality

• Regional pain points: Florida, Texas, and beyond

• Why insurance costs and HOAs are distorting markets

• Buyer psychology, affordability, and rent vs. own dynamics

• Tariffs, uncertainty, and interest rate volatility

• The policy fixes Daryl believes we need—fast

• Climate risk, migration, and Redfin’s flood data experiment

• Why your home shouldn't be your investment strategy

• Lessons from game theory and behavioral economics

Guest Links:
Daryl Fairweather’s book Hate the Game is available now on Amazon and Audible.
Follow Daryl on X, LinkedIn, and Substack @FairweatherPhD

Robert Hagstrom returns to discuss the investing principle he believes most value investors still misunderstand—despite decades of evidence from Warren Buffett. In this conversation, we explore why focus investing works, what traditional value investors got wrong about the Magnificent Seven, and how the industry's obsession with low P/E ratios and short-term tracking error leads to missed opportunities. Hagstrom also reflects on lessons from working with Bill Miller and explains why evolving your investment approach is essential for long-term success.

In this episode, we discuss:

• How Hagstrom fell into money management by accident

• What Buffett’s 1983 letter taught him about investing

• The dangers of rigid value investing frameworks

• Why most active managers fail over time

• The key to compounding that investors overlook

• Drawdowns, tracking error, and the psychology of focus investing

• Why private equity’s appeal is mostly an illusion

• What Buffett’s surprise CEO handoff really means for Berkshire Hathaway

Megan Horneman: Fragile Optimism, Hidden Inflation Risks, and What Investors Are Missing

In this episode, we’re joined by Megan Horneman, Chief Investment Officer at Verdence Capital Advisors, to discuss her firm’s 2025 outlook and what she sees as the key macro risks and opportunities for investors right now.

We explore the themes behind her “Year of Fragile Optimism” thesis, including consumer stress, inflation persistence, the impact of tariffs, debt sustainability, and why many investors are misreading the current market environment.

Megan also shares how she’s thinking about portfolio positioning in a world where traditional recession indicators are breaking down and valuations remain elevated.

Topics Discussed Include:

• Why consumer strength may be a mirage

• The risk of complacency around inflation

• Tariffs, trade imbalances, and global uncertainty

• The growing consequences of U.S. and global debt

• Why small/mid-caps and international stocks may offer better value

• Fixed income positioning in a “higher for longer” environment

• The case for active management over passive in today’s market

• Opportunities and risks in alternatives and private assets

• Lessons investors can learn from recent volatility

If you're looking for a thoughtful macro perspective and practical ideas for navigating today's complex market landscape, this conversation is for you.