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Last time I wrote about how economic recoveries come in various shapes when plotted on a graph: V-shaped, U-shaped, even L-shaped. But today’s expansion looks more like a K – a winner-take-all world split between the haves and the have-nots. Investors today are watching a split-screen economy with differing narratives flickering on and off – a constant tussle of facts and opinions seemingly pulling in opposite directions. What’s the right investment response to all this? Investors should never feel pressure to get the outlook exactly right. Investing isn’t a game of precision. Rather, the goal should be to tilt portfolios toward the highest probabilities, pick your spots to take risk, all while balancing risks and opportunities.
For every K-shaped distortion in today’s economy, there’s another way to look at it – and position around it. Cycles built on extremes never last. The task now is to move from the obvious winners toward the overlooked beneficiaries – where new leadership is quietly emerging.
Below, we outline Forstrong’s key ideas, organized around 3 pillars: Protection, Income, and Growth.
A new divide is emerging in the so-called “debasement trade”: crypto versus gold. Both assets express the same unease – distrust of policy orthodoxy, desire for assets outside the traditional monetary system, and concern over ballooning government debt and unchecked fiscal stimulus in developed economies. These are long-term, secular themes.
But recent price action tells the story best. Crypto thrives on speculation, rising and falling with risk appetite. Gold, by contrast, thrives on uncertainty. It also has a reliable, price-insensitive buyer: foreign governments. Since Russia’s 2022 invasion of Ukraine, central banks, particularly in the Global South, have been persistent accumulators even as Western ETFs have been net sellers.
Actionable: Even after a strong run and volatility, investors should maintain exposure to precious metals. The gold bull market has broadened to silver and platinum – even industrial commodities like copper are showing signs of joining the rally (and would have different macro drivers for return). Historically, only a sharply hawkish Fed or a surging U.S. dollar has stopped such moves. Neither appears likely now.
Income: beyond the crowded trades
Despite multiple sources of potential volatility, credit markets remain oddly tranquil. U.S. and Canadian spreads – investment-grade and high-yield alike – are hovering near record lows. Meanwhile, private credit, which flourished after the post-2008 Dodd-Frank reforms curtailed bank lending, is now under scrutiny over liquidity and credit quality.
Elsewhere, opportunities look far more compelling. Many regions outside North America offer higher real yields, improving fundamentals, and, with a softer U.S. dollar, potential currency tailwinds. In a world where Western central banks seem content living with 3% inflation, global income diversification will be a winning strategy.
Actionable: Reduce exposure to North American debt structures and look abroad for yield. Select emerging market debt, handily outperforming in 2025, remains a key source of stable and rising income.
The temptation to chase AI stocks is understandable. A U.S. industrial boom, courtesy of artificial intelligence, is underway, even if it’s not the jobs-rich manufacturing revival once promised. AI’s allure is simple: It promises a powerful boost to productivity. In the first half of 2025, output per hour in the U.S. durable goods sector grew at an annualized 4.9% - the fastest in nearly two decades outside post-recession rebounds.
But investors now seem convinced that America’s AI lead is permanent. Growth expectations embedded in U.S. stock valuations are near century highs, rivaled only by the late 1990s dot-com bubble. Foreign investors have piled in, pouring a record $290 billion into U.S. equities in the second quarter, pushing foreign ownership to 30% - the highest level since World War II. When all this changes is anyone’s guess. But it cannot be ignored that a massive amount of money has been shoved to the middle of the table, and if the cards don’t come up right, the downside will be significant.
Meanwhile, a different dynamic is unfolding elsewhere. Trump’s “America First” agenda has forced other nations to respond – with higher fiscal spending, competitiveness reforms, and fresh trade alliances. We’ve written extensively about this “Protectionist Paradox,” which is now reshaping global investment flows. Policymakers abroad see AI not as America’s advantage but as the great equalizer. The uneven recovery of recent years has laid the groundwork for a powerful global broadening.
Actionable: Trim exposure to crowded corners of the U.S. AI trade and lean into international markets with better value and rising momentum. Focus on countries with room to ease policy, solid external balances, and less stretched positioning. Asia, in particular, stands out as one of the most attractive destinations for capital.
Every cycle eventually runs out of road. The past few years have been defined by speed - policy accelerants technological leaps, and speculative bursts. But this so-called K-economy has crowded investors into the same fast lane, leaving vast stretches of opportunity wide open elsewhere.
Now comes the rotation phase – not the end of the cycle, but the broadening of it. The world is shifting from speed to balance, from narrow U.S. leadership to global participation. For investors, the smartest move isn’t to slam the brakes but to change lanes before everyone else does.
Tyler Mordy, CFA, is CEO and CIO of Forstrong Global Asset Management Inc., engaged in top-down strategy, investment policy, and securities selection. This article first appeared in Forstrong’s Insights page. Used with permission. You can reach Tyler by phone at Forstrong Global, toll-free 1-888-419-6715, or by email at tmordy@forstrong.com. Follow Tyler on X at @TylerMordy and @ForstrongGlobal.
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Content © 2025 by Forstrong Global. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited. Used with permission.
The foregoing is for general information purposes only and is the opinion of the writer. The author and clients of Forstrong Global Asset Management may have positions in securities mentioned. Performance statistics are calculated from documented actual investment strategies as set by Forstrong’s Investment Committee and applied to its portfolios mandates, and are intended to provide an approximation of composite results for separately managed accounts. Actual performance of individual separate accounts may vary with average gross “composite” performance statistics presented here due to client-specific portfolio differences with respect to size, inflow/outflow history, and inception dates, as well as intra-day market volatilities versus daily closing prices. Performance numbers are net of total ETF expense ratios and custody fees, but before withholding taxes, transaction costs and other investment management and advisor fees. Commissions and management fees may be associated with exchange-traded funds. Please read the prospectus before investing. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.
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