Dynamic Alpha Macro Fund December 2025 Overview

This Month’s Performance

The Dynamic Alpha Macro Fund (DYMIX) gained 2.51% in December, outperforming both the S&P 500 Total Return Index (0.06%) and the S&P Target Risk Balanced Index (0.50%). For the full year, the fund returned 25.36%, ahead of the S&P 500 (17.88%) and the balanced index (16.59%).  This highlights the Fund’s ability to outperform the index using unique sources of return, demonstrating that strong gains can be achieved without relying on the same risk drivers as the S&P 500.

Results were led by the macro sleeve, where our silver, coffee, and British pound exposures contributed, while our strategic equity allocation was a slight detractor. Overall, December was a fitting example of why we pair strategic U.S.-equity exposure with an actively managed global macro book: the objective is to compound returns across varied environments while maintaining the flexibility to adjust as the data evolves.

Looking ahead

A year ago, we wrote in our 10-year anniversary letter that we never expected to have to fight for so long against the headwind (from a benchmarking or comparative perspective) of a seemingly never-ending bull market in U.S. stocks. The S&P 500 – the ultimate benchmark irrespective of any fund’s preferred benchmark in their marketing materials – is up 13.5% annualized over the past 11 years and 17% annualized since the generational, secular low in March 2009. A 17-year bull market feels like forever yet is par-for-the-course when it comes to these structural bull markets. While acknowledging it is a very small sample size, we note that the previous two secular bull markets lasted for 19 years (1949-1969) and 18 years (1982-2000), respectively. At 17 years, and at valuations that mirror or are above ending valuations for the previous episodes, it’s safe to say that we are close to the tail end of this one.

Given that, it’s worth it to examine what the coming years may look like across equities and other asset classes, along with our blueprint for managing the portfolio through time.

Equities

First, let’s consider the stock market. We are currently in a CapEx investment cycle, one that appears to be driven by excessive spending.[1]. Let’s look back at a historic investment boom—one that is old enough for us to judge objectively, rather than comparing it to recent events we lived through. Railway stocks in the mid-1800s fit that bill:

Railway stock prices peaked years before CapEx peak

Figure 1 Source: BCA Research

The chart at left is quite instructive. First, look at the stock price peak in panel 1. Then skip to panel three and note that the peak in physical investment was in ~1849 (peak of green line), roughly 3 years after the share price peak in 1846 (thin red line).

This is very similar to our thesis on AI. We have a ‘CapEx bust’ thesis that is not about the CapEx itself busting, so to speak. It’s more about the CapEx continuing while the stock prices of Meta, Microsoft, Google, etc. compress due to investors finally bringing a sledgehammer to valuations as the realization of slowing long-term profit margins and earnings growth finally hits home.

This is also what happened to Cisco Systems from 1999-2002. The company had 60-70% gross margins (just like NVDA) and 40% projected long-term earnings growth. A massive valuation compression took place from 2000-2002 (with Cisco losing ~90% of its value). Actual earnings growth over the ensuing two-and-a-half decades was not too shabby, compounding at a very respectable 8%. But the stock took 25 years to recover, just breaking out above the 2000 peak in 2025.

Because the Magnificent-7 stocks[2] have better underlying businesses than Cisco, we don’t look for an 80% or 90% decline in their share prices. Rather, we look for a more moderate 40-50% decline, in a similar, slow-motion unravelling as the 2000-2002 bear market, over several quarters.

Furthermore, we believe that overvaluation in the stock market is more broad-based today than it was in 1999. As an example, many energy names, and even utilities, which sailed through the dot-com bust unscathed, are trading today at very high valuations, tied to the AI/power/datacenter theme. Everyone remembers “Pets.com” from its year 2000 Superbowl commercial while forgetting that it was a miniscule part of the market cap of the Nasdaq at its peak. The reason that equity long/short hedge funds performed so well from 2000-2003 was that they were able to “shoot fish in a barrel” when buying small cap, value, and REIT stocks. There is far less opportunity for such a rotation to be effective today.

Hence, our equity view can be summed up as: no crash, and no “crisis”. Just an old-school bear market driven by a valuation re-set, while underlying fundamentals continue to do okay.

Lastly, any upcoming bear market would likely be the first of two or even three bear markets in a sequence, over the course of 10+ years – in fact, that’s what is required to generate a secular bear market that completes the full cycle (the yin to the yang of the preceding secular bull market).

Positioning: We have no equity index futures position today, but plan to have an outright short position in either the S&P 500 or the Nasdaq 100 – as market-cap weighted indices, both are overloaded with AI-related tech stocks/themes and offer much deeper downside than the Nikkei, the Russell 2000, or the Dow Jones.

Currencies

We believe that the U.S. dollar (USD) is in a secular bear market. Our view is not predicated on the U.S. losing its reserve currency status. We are currently long the British pound (GBP), and we were long the Japanese yen (JPY) before taking the position off when it hit our risk control levels in summer 2025.

The yen is on our radar once more and is a position we will likely look to add back to complement our GBP holding. Why is long yen a great idea? Importantly, it has nothing to do with the yen carry trade. The yen carry trade drove yen weakness from 1995-1998 and then spectacularly blew up from September-October 1998. Unwinding of the carry trade similarly drove yen outperformance in the years immediately after the Global Financial Crisis of 2008.

Japan is a country with 230% debt/GDP vs 130% in the USA. Regardless, we believe Japan is the better credit risk and would rather lend money over 30 years to Japan than the U.S. Why? Japan owes much more of its debt to itself and is a massive net foreign creditor (chart at left below). The yen is dirt cheap on a purchasing power parity (PPP) basis (chart at right) – a fancy economic term that basically states that a basket of goods should cost the same in different countries once you adjust for the spending power of a currency locally. Given the need to invest in defense alongside domestic political pressure to invest in local fiscal spending to drive growth, Japan should see slow and steady repatriation flows. These repatriation flows – combined with interest rate policy divergences between the Bank of Japan and the Fed – should drive renewed yen strength; yen “carry trades” simply do not exist in size anymore and won’t be the catalyst.

Source: BCA Research

Positioning: Our overall positioning is likely to remain dollar bearish for years to come. We are currently long GBP vs USD and plan to add back long JPY vs USD in 2026. The two currencies are both cheap against the dollar and, importantly, tend to be non-correlated with each other.

Commodities

We’ve written many times in the past that the strategy of “buy and hold a basket of commodities” or a commodity index is not profitable over time. Unlike bonds or equities, commodities do not have a discounted set of cash flows associated with them. You may get a once-in-a-century bull market, as from 2001-2008, tied to China’s remarkable S-curve of demand from its industrialization. But you are more likely to be disappointed. Commodity index performance tables in investment banking slide decks have all sorts of sleight of hand tricks to make them look good: you need the carry from interest rates (collateral yield) plus you need some amount of backwardation in key commodities like crude oil that have a large market share in the index (roll yield) to make any money holding a long index position for years – spot price appreciation cannot do the heavy lifting on its own. 

Our view has always been that each individual commodity should be treated as its own entity and investment decisions must be made commodity by commodity. With a five-year view, we presently believe:

• Precious metals are in the early to mid-stages of a secular bull market (gold, silver).
• Among industrial metals, copper is in the early stages of a bull market, while other metals (tin, aluminum, iron ore) offer mixed fundamentals.
• Crude oil is close to ending a cyclical bear market over the past few years and will be in a structural bull market soon.
• Agricultural markets are split between expensive markets (cattle, coffee) and cheaper markets (sugar, corn, soybeans). Broadly speaking, we want to be short the former and long the latter.

Given that it’s one of our larger current exposures, we offer some additional thoughts on silver. Look at two numbers in the table below: photovoltaic (solar panel) use has grown from 60 million ounces in 2015 to 232 million ounces today (orange boxes), at par with jewelry demand. This is truly fantastic growth. Although the table now points to silver being in a multi-year deficit in the bottom rows, we tend to discount this: silver has been in an on-and-off deficit in tables like these for the past 25 years, and these deficits have never correlated with the silver price movement. Perhaps this time is different, and these mining deficits are fundamentally relevant; we would rather hang our silver thesis on increased solar panel demand and on silver’s demand as a monetary asset (precious metal) rather than make a supply case for the theme.

Silver balances: solar now tied with jewelry demand

Source: World silver survey 2024

On the supply side, although we tend to ignore the deficits at the bottom of the table, we note that most silver supply does not come from dedicated silver mines where production can be ramped up quickly; rather, silver is predominantly mined as a by-product of gold, copper, lead, and zinc mining, and hence supply growth tends to be inelastic to dedicated silver demand, responding more to demand for other metals (which may or may not send demand signals that are synchronized with silver’s demand).

If you are bored, the entire 92-page document where we pulled the table above, released by The Silver Institute, is worth a read, here: https://silverinstitute.org/all-world-silver-surveys/

Positioning: Our overarching process is to lead with our highest conviction views and concentrate capital in our best ideas from a risk/reward standpoint. Applied to commodities, we are presently short cattle and coffee, and long silver. Other trades tied to our commentary above will likely enter the portfolio as opportunities arise.

Interest rates

Prevailing sentiment on interest rates across professional money managers calls for a yield curve steepener. Most in the financial community think this should be a bull steepener, where short rates fall while long rates are sticky. A minority is still calling for a bear steepener, arguing the Fed is nearly done cutting and that long rates will shortly resume their march higher as inflation is perking up and foreigners pull back on funding our deficits.

In contrast, we have a modified (i.e. not duration matched) yield curve flattener on, looking for much lower rates across the curve. This is a short to medium-term view, where we are anticipating a potentially deflationary recession, as upper echelon income cohorts finally pull back on spending as the wealth effect reverses alongside lower equity prices,(per our comments at the beginning of the letter about a 30-40% drawdown). The current yield curve is shown in the chart below by the solid green line and a rough sketch of what we envision as targets for our positions is indicated by the shift to the dotted green line.

Yield curve: flattener

Source: Bloomberg

If our view pans out, we plan to then switch to an outright bearish position on long duration Treasuries, as the fiscal crisis that perma-bear economists have been calling for since the 1980s does finally appear to be creeping up on us over the next 5 years or so. The timing for such a position would be after a recession, perhaps sometime in late 2027.

Overall Portfolio Positioning

As of today:

[1] The core of our portfolio can be summed up as: long silver alongside a yield curve flattener (via long 2-year Treasuries and long 10-year Treasuries).

[2] In addition, we have idiosyncratic positions such as short coffee and short cattle. These are non-correlated to other positions and function as good diversifiers.

[3] We then round out the portfolio with a core, multi-year short USD theme, which we currently express via long GBP.

We have many other ideas ready to add to the portfolio as fundamental and technical positioning and price action come into alignment.

Closing Thoughts

As we move toward 2026, market dispersion remains high—creating opportunity for active, multi-asset strategies like the Dynamic Alpha Macro Fund (DYMIX). We continue to focus on areas where long-term fundamentals diverge from short-term pricing, and where mispriced assumptions can lead to powerful trends.

As always, we continue to be nimble. If the data and/or our views change, we can pivot our positioning and find other trades within the 40+ markets we have available. This is also why we maintain a strategic allocation to U.S. equities in our overall fund strategy, balancing a buy-and-hold approach with active global macro long/short positions. 

We Are Here To Help

We appreciate your continued trust and partnership and look forward to updating you on our progress in the coming months. Please feel free to reach out if we can provide additional clarification on specific ideas or the portfolio more broadly.

If you are a financial advisor and would like more information on our multi-dimensional approach towards asset management, you can download our white paper titled Busting Seven Risk and Return Myths by visiting our website at DynamicWG.com, or email us at info@DynamicWG.com. If you are an individual investor, we are happy to address any questions you may have and put you in touch with a qualified advisor, if so desired.

[1] CapEx stands for Capital Expenditure. This entire sentence is our polite nomenclature for avoiding the dreaded ‘bubble’ reference, which tends to elicit an emotional response.

[2] Alphabet (Google), Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla