Damped Spring’s Andy Constan says bond yields are becoming more attractive outside the U.S.
A previous version of this newsletter incorrectly spelled the name of Salomon Brothers. It has been corrected.
One advisor is steering clients away from U.S. investments
Get ready for more portfolio diversity talk after famed investor Stanley Druckenmiller just schooled investors with a lucrative bet on Brazil.
Others have also been looking hard at what else the world outside the U.S. has to offer, like the founder and chief investment officer of macroeconomic research firm Damped Spring Advisors, Andy Constan, whose breakup with U.S. assets started early last year.
“For 20 years almost, certainly since the financial crisis, owning U.S. assets, both stocks and bonds, has far outperformed owning rest-of-world assets,” the 40-year Wall Street veteran told MarketWatch in an interview on Monday.
Outperformance, he says, comes down to policy and balance. Investors need to own stocks to experience the upside of growth and bonds as a diversifier in case that growth doesn’t kick in, he said. Balance comes from both stocks and bonds offering a reasonable risk-adjusted return.
That combination of policy and balance had him favoring U.S. assets for most of his career, which started in 1986 at Salomon Brothers, where he led equity derivative sales during the era of “Liars Poker.” He also worked for hedge-fund giant Bridgewater Associates and ran a hedge fund.
Constan said things began to shift for his all-American stance in early 2025. “The number one thing is the very sizable increase in Japanese, German, non-U.S. bond market yields, such that now those bonds can actually generate a very sizable positive return if you have a recession.”
He said bonds and stocks from the U.K., Canada, Australia and elsewhere were also showing better balance, and that overall improvement may be driving dollar weakness, as global investors look to repatriate their U.S. dollars elsewhere.
He entered 2025 overweight in U.S. stocks, and gradually pared back that exposure. Last month, he shifted his long-only portfolio – what he called “just regular old investing like we all do for our retirements and in the long term” – completely out of the U.S.
A final reason for his shift is government policies elsewhere looking more attractive than those of the U.S., where he’s struggling to figure out current goals of President Donald Trump.
“I read him right when he was trying to detoxify and shrink the U.S. government in the first half of last year, and then I’ve read him wrong regarding what he’s trying to do today. Now, it seems just pump up the stock market,” he said.
What’s clear to him is that policies of big deficits and aggressive monetary policy no longer are limited to the U.S. “So it’s not anti-Trump, it’s not anti-U.S., it’s just other places have some good opportunity now, which they didn’t for 15 years.”
His mantra for individual investors is to use passively managed funds. To anyone who asks, he says buy “diversified, low-cost, stocks, bonds, gold, commodities across the world and go back and do your regular day job. Stop trying to trade the market because you can’t do it,” he said.
Constan has made some savvy past calls, such as in late December 2021, when he predicted Fed plans for balance sheet reductions would prove “kryptonite” for assets – stocks tumbled in 2022.
On the hot-button topic of the impact of artificial intelligence, he’s worried about it when combined with some troubling market mechanics.
“These are big uncertain things and at the same time, the overall leverage in the financial system due to all of this liquidity that has been thrown at the market, suggests there’s a high potential of a big move, whether it’s up or down,” said Constan.
“Whatever asset you’re looking at people are on a knife’s edge regarding leverage and that doesn’t have to go bad; that can go very very well before it goes very, very bad,” he said.
“Humble down your confidence regarding what the future has right now and position yourself accordingly, which for most of us is just diversified long only,” Constan said.
The markets
U.S. stock futures (ES00) (YM00) (NQ00) are pointing higher, Treasury yields BX:TMUBMUSD10Y are rising, and gold (GC00) and silver (SI00) are rebounding. Cocoa futures (CC00) have hit a 2 1/2 year low.
The buzz
Palo Alto shares (PANW) are down as upbeat earnings got overshadowed by weak profit guidance.
Shares of chip makers Advanced Micro Devices (AMD) and Broadcom (AVGO) are down after Meta (META) and Nvidia (NVDA) expanded their partnership.
Quarterly filings showed Berkshire Hathaway (BRK.A) (BRK.B) placing a new bet on the New York Times (NYT), lifting Chevron (CVX) and Domino’s Pizza (DPZ) stakes and reducing the holding of Amazon (AMZN).
Ebay (EBAY), Carvana (CVNA) and Booking Holdings (BKNG) earnings are due after the close.
November and December housing starts rose 3.9% and 6.2% respectively. December durable-goods orders contracted by a less-than-expected 1.4%. Industrial production is due at 9:15 a.m.
Fed Vice Chair for Supervision Michelle Bowman will speak at 1 p.m., and minutes of the Fed’s January policy meeting are due at 2 p.m.
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The chart
The chart from Barclays global equity derivatives strategy team shows sharply rising volatility among single U.S. stocks. That’s amid the third-quietest start to the year for the S&P 500 SPX – trading in a 2.7% range – in the past 100 years. “Volatility, in other words, has not disappeared; it has migrated decisively to the stock level, even as the index range masks the underlying turbulence. Indeed, the average S&P single-stock trading range year-to-date has been 6.8× larger than that of the S&P 500, a degree of micro-level dominance that has no precedent in the past 30+ years,” says a team led by Anshul Gupta.
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
Random reads
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