| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
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Absolute Return Partners discusses momentum investing strategy while acknowledging current expensive US market valuations. The manager, who describes himself as a thematic rather than pure momentum investor, analyzes how momentum strategies have outperformed by 5x in US markets and 3x globally since 1972, following Richard Driehaus methodology of focusing on positive earnings surprises and accelerating growth. However, expensive US equity valuations have prompted defensive positioning including significantly reducing US exposure, increasing allocations to Europe, Canada, Japan and China, lowering portfolio beta, adding industrial metals exposure, and buying gold. The manager emphasizes that market booms don't end simply due to overvaluation but require catalysts, historically aggressive monetary tightening. Key risk signals include investors reacting negatively unless earnings surprises are substantial. While US returns over the next decade are expected to fall short of recent performance, the manager acknowledges that seemingly illogical behavior can persist longer than expected, with any eventual catalyst likely being unexpected.
While momentum investing has historically outperformed dramatically, expensive market valuations require defensive positioning, though booms don't end simply due to overvaluation but require unexpected catalysts to trigger corrections.
The manager expects US equity returns over the next decade to fall dramatically short of recent years' returns due to expensive valuations. However, they acknowledge that seemingly illogical market behavior can continue much longer than expected, and any catalyst for correction will likely be unexpected. They are watching for danger signals, particularly when investors react negatively to earnings surprises unless they are substantial.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 1 2026 | 2026 Q1 | - | Dotcom, earnings, Japan, momentum, risk management, thematic, value | - | Thematic investment manager discusses momentum investing's historical 5x outperformance in US markets while taking defensive action against expensive valuations. Reduced US exposure, increased Europe/Japan/China/Canada allocations, lowered beta, added industrial metals and gold. Expects lower US returns ahead but acknowledges booms require unexpected catalysts to end, not just expensive valuations. |
| Dec 1 2025 | 2025 Q4 | - | Carbon, Climate, energy, innovation, policy | - | Jensen identifies three key 2026 risks: Trump appointing an ultra-dovish Fed Chair causing inflation, an AI bubble burst spreading globally, and irrational climate policies. After delivering 30% returns in 2025, he's positioned defensively with overweight commodities and non-US equities, expecting them to outperform. Markets are in late-stage bubble territory but not yet at extreme levels. |
| Oct 1 2025 | 2025 Q3 | - | Agriculture, Climate, Electricity, energy, global, infrastructure, insurance, policy | - | Climate change is creating asymmetric warming with the Northern Hemisphere at +2°C above pre-industrial levels versus +1.3°C in the south. This drives investment opportunities in climate-affected industries including insurance, agriculture, and electricity generation. Despite questioning human responsibility for all climate effects, the manager advocates investing with political consensus favoring climate solutions rather than opposing the unstoppable trend. |
| Jul 1 2025 | 2025 Q2 | - | Concentration, diversification, global, Megatrends, risk management, technology, value | - | Megatrend investor deliberately avoiding Magnificent 7 concentration risk, maintaining zero allocation to expensive US tech stocks. Focus on European and Asian markets delivering lower volatility and strong downside protection. Strategy targets double-digit returns over full cycles through value discipline and risk management, accepting near-term underperformance during US tech rallies. |
| Mar 31 2025 | 2025 Q1 | RUT | Fed, Politics, rates, Recession, tariffs, Trade Policy | - | Manager theorizes Trump is deliberately engineering recession through tariffs to force Fed rate cuts and time recovery for 2026 midterms. Despite Wall Street warnings of economic damage, recession probability has risen to 40%. Russell 2000 down 16% signals investor preparation for downturn. Treasury yields falling from 4.8% to 4.2% confirms weakness expectations. |
| Jan 2 2025 | 2024 Q4 | NVDA | Bubbles, Carry Trade, Japan, Macro, risk management, Trump, valuation | - | Absolute Return Partners warns of three converging risks in 2025: US megacap valuations at bubble levels reminiscent of Japan 1990, yen carry trade unwinding as Bank of Japan hikes rates, and Trump's inflationary policies forcing Fed tightening. Record retail speculation in leveraged ETFs signals dangerous excess. Manager advocates hedging over exit strategies given timing difficulties. |
| Oct 2 2024 | 2024 Q3 | - | Elections, Energy Transition, Green, nuclear, Politics, US | - | Fund's green transition exposure hurt during Trump polling strength in June-July but recovered as Harris gained momentum. Manager warns US national polls are meaningless - only swing states matter for election outcome and market impact. Political volatility creates rapid theme rotation requiring quick adaptation as investment sentiment can shift dramatically within minutes. |
| Jul 3 2024 | 2024 Q2 | - | Central Banks, China, crypto, gold, Risk Assets, Valuations, Wealth Gap | - | US equity valuations and wealth-to-GDP ratios are 30-35% above sustainable levels, creating conditions for eventual mean reversion. Central banks are accumulating gold as China builds a renminbi currency block to challenge dollar dominance. The current monetary system faces structural changes similar to the US-UK transition around World War I. |
| Apr 15 2024 | 2024 Q1 | - | Brexit, Economic Policy, European Union, Gdp, Immigration, Trade Policy, United Kingdom | - | Brexit has proven to be the biggest economic own goal in history, with the UK economy significantly underperforming since 2016. Academic studies show GDP impacts of -2% to -10%. Post-Brexit trade deals offer no new benefits while sacrificing valuable EU relationships. The UK will eventually rejoin the EU as economic pressures mount, but this will take 10-15 years. |
| Feb 1 2024 | 2023 Q4 | - | China, commodities, Energy Transition, inflation, rates, Recession, Risk Assets | - | Absolute Return Partners sees 2024 favoring risk assets on US soft landing expectations, with Japanese markets leading gains. Commodities and green stocks offer value on China recovery and attractive post-correction valuations. Key risk is Red Sea shipping inflation forcing Fed to keep rates higher, threatening unprofitable tech and shorted stocks that rallied on dovish expectations. |
| Feb 10 2023 | 2023 Q3 | TM | Battery, Electrification, energy, innovation, Lithium, technology, Transportation | - | Jensen highlights BTRY's breakthrough thin-film solid-state battery technology that runs ten times longer than lithium-ion batteries, alongside Toyota's 2027 solid-state car battery launch. The shift could accelerate electrification, increase lithium demand by 35%, and potentially displace green hydrogen in transportation applications. |
| Mar 7 2023 | 2023 Q2 | - | asset allocation, Bonds, demographics, equities, globalization, returns, Wealth-to-GDP | - | Jensen warns that three structural forces will drive lower future returns: US wealth-to-GDP ratios 50% above historical norms must normalize, deglobalization is reducing economic growth and corporate profits, and aging demographics are shifting capital from equities to bonds as baby boomers retire. These challenges are virtually set in stone and warrant moderating investment optimism for the decade ahead. |
| Apr 28 2023 | 2023 Q1 | - | Bonds, Central Banks, inflation, liquidity, QE, rates, Recession | - | Jensen argues the QE era continues as tight liquidity drove $23 trillion in 2022 wealth losses and broke 60/40 strategies. With the global economy slowing and core PPI at manageable 3.4%, he expects Fed accommodation despite QE's inflationary nature. Central banks may accept higher inflation to destroy debt mountains, but another crisis looms ahead. |
| Feb 2 2023 | 2022 Q4 | - | - | - | |
| May 12 2022 | 2022 Q3 | - | - | - | |
| May 9 2022 | 2022 Q2 | - | - | - | |
| May 4 2022 | 2022 Q1 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
MomentumThe letter extensively discusses momentum investing strategy, referencing Richard Driehaus methodology and analyzing momentum performance since 1972. Manager explains momentum investors have outperformed by 5x in US markets and 3x globally, focusing on positive earnings surprises and accelerating growth metrics. |
Momentum Earnings Growth Quality |
GoldManager explicitly states they bought gold as one of five risk management actions taken to reduce portfolio risk amid expensive US equity valuations. |
Gold Commodities | |
| 2025 Q4 |
AIManager views AI as a bubble similar to the dotcom bust, with combined value of top 10 US stocks exceeding GDP of major countries. Concerns about expensive valuations and hyped investor behavior, particularly in companies with no revenues and unprofitable Nasdaq stocks performing best in 2025. |
Bubble Valuations Technology Hyperscalers Nasdaq |
GoldGold was a big winner delivering strong returns in 2025, though manager notes it's not behaving like the risk-off asset expected. Portfolio allocation has been regularly trimmed but the party isn't over yet according to the manager's assessment. |
Risk-off Portfolio Returns Allocation | |
RatesMajor concern about Trump replacing Jerome Powell with an uber-dove who will cut rates for political reasons. This could lead to yield curve steepening and new inflation spike. Fed Funds currently at 3.50-3.75% with Trump wanting cuts to 1%. |
Federal Reserve Monetary Policy Inflation Yield Curve | |
CommoditiesManager expects commodities to outperform equities in 2026 due to intense focus on climate change and governments' desire to go green. This will raise demand for many commodities, particularly green metals, as long as political commitment to go greener remains. |
Green Metals Climate Change Demand Energy Transition | |
| 2025 Q3 |
Energy TransitionClimate change is driving asymmetric warming between hemispheres, with the Northern Hemisphere warming much faster than the Southern Hemisphere. This creates investment opportunities in renewable energy infrastructure as political initiatives align with consensus views on addressing climate change, despite the manager's view that humans aren't solely responsible for all climate effects. |
Renewable Energy Climate Policy Infrastructure Political Initiatives Consensus |
AgricultureClimate change will fundamentally alter where agricultural products can be grown profitably. Some regions will see agriculture die while others will prosper, creating massive structural changes in the industry. The manager expects significant transformation in agricultural patterns and investment opportunities as growing conditions shift globally. |
Climate Impact Regional Shifts Crop Yields Geographic Changes Structural Change | |
| 2025 Q2 |
ValueThe manager emphasizes avoiding expensive megacap stocks and focusing on undervalued opportunities. They maintain zero allocation to the Magnificent 7 and underweight US technology stocks due to elevated valuations. The strategy aims to identify tomorrow's winners rather than yesterday's winners. |
Value Undervalued Expensive Multiples Cheap |
Risk AppetiteThe fund maintains low equity beta well below one and focuses on Value-at-Risk in portfolio management. They aim for satisfactory returns in down-markets with single-digit losses at worst. The strategy serves as a robust diversifier of risk in broader equity portfolios. |
Beta Volatility Diversification Risk Downside | |
| 2025 Q1 |
Trade PolicyTrump is aggressively pursuing tariffs despite economic damage warnings from Wall Street economists. Goldman Sachs estimates tariffs could reduce GDP growth by 0.8 percentage points in Q1 2026. The manager questions whether Trump is deliberately engineering an economic slowdown to force Fed rate cuts and set up recovery timing for midterm elections. |
Tariffs GDP Recession Fed |
RatesThe manager suggests Trump may be deliberately seeking an economic slowdown to force Federal Reserve rate cuts, given his nickname as the King of Debt and career built on debt financing. Lower rates would benefit Trump's economic strategy and political positioning heading into 2026 midterms. |
Fed Rate Cuts Debt Monetary Policy | |
| 2024 Q4 |
Risk AppetiteRecord $1 trillion flows into US equity ETFs in 2024, with leveraged single-stock ETFs particularly popular among retail investors. The GraniteShares 2x long Nvidia daily ETF saw AuM rise from hundreds of millions to over $5 billion in 12 months, indicating extreme speculative behavior around the market fringes. |
ETFs Leverage Retail Speculation Flows |
YenThe yen carry trade acts as a global liquidity tap, where JPY weakness increases global liquidity and JPY strength decreases it. With the Bank of Japan raising rates for the first time in 17 years in July 2024 and planning further hikes in 2025, this poses significant risks to global risk assets as carry trades unwind. |
Carry Trade Liquidity Japan Rates Currency | |
Trade PolicyTrump's policy program includes aggressive tariff implementation and deportation of illegal immigrants, both executable under Executive Order mandate. Even moderate implementation scenarios show significant inflationary impact, with the high scenario projecting dramatic CPI increases that could force Fed rate hikes. |
Tariffs Immigration Inflation Policy Trump | |
| 2024 Q3 |
Energy TransitionThe fund has significant exposure to the green transition which suffered in June and July as Trump trades gained favor and the green agenda was pushed to the backburner. Harris' rise in polls changed everything as investors became happy to own green stocks again and nuclear came back into favor. |
Green Nuclear Climate Renewable Clean |
| 2024 Q2 |
CryptoJensen maintains his stance against cryptocurrencies, calling them a wicked asset class with no intrinsic value. He argues crypto is more like a religion than an investment, offering extraordinary returns but lacking downside protection and correlation benefits. |
Bitcoin Cryptocurrency Digital Assets Speculation Volatility |
GoldCentral banks worldwide are increasing gold holdings from 15% to nearly 20% of reserves, with emerging market central banks leading purchases. Jensen suggests this may facilitate China's efforts to establish a renminbi currency block backed by gold convertibility. |
Central Banks Reserves Currency China Renminbi | |
Risk AppetiteUS equity markets have enjoyed spectacular rallies since 2009, driven by central bank money printing and tech stocks. However, earnings multiples are now uncomfortably high and wealth concentration has reached extreme levels with 46% held by the richest 1%. |
Valuations Wealth Gap Central Banks Tech Stocks Multiples | |
| 2024 Q1 |
European UnionThe letter extensively analyzes Brexit's economic impact and argues the UK will eventually rejoin the EU due to economic necessity. Brexit has resulted in massive loss of economic momentum with GDP impact estimates ranging from -2% to -10%. The UK traded more with Netherlands than China before Brexit, highlighting the economic importance of EU membership. |
Brexit Trade Economic Integration Free Trade Referendum |
Trade PolicyBrexit represents the biggest economic own goal in history according to the author. The UK voluntarily left a free trade arrangement where 7 of its 10 largest trading partners were EU members. Post-Brexit trade agreements with Canada, Australia and New Zealand are merely copy-paste versions of existing EU agreements, providing no new benefits. |
Free Trade Trade Agreements Economic Policy International Trade Trade Partners | |
United KingdomThe UK economy has significantly underperformed since the Brexit referendum, with living standards now well behind the EU and US. The country began falling behind immediately after the 2016 referendum. Immigration patterns have not improved post-Brexit, with non-EU migration rising dramatically while EU migration turned negative. |
Economic Performance Living Standards Immigration GDP Underperformance | |
| 2023 Q4 |
CommoditiesCommodities should perform well if China has turned the corner and the US achieves a soft landing. Industrial metals offer good value given China's recovery signs and US economic resilience. Oil prices may rise as drilling capex is now less than one-third of levels from a decade ago, potentially leading to supply shortages despite declining demand. |
Industrial Metals Oil China Supply Capex |
Energy TransitionGreen stocks are valued more attractively after a 2-year bear market, despite climate challenges being worse than ever. Wind turbine manufacturers and other green companies may turn profitable as contracts are renegotiated, material costs decline, and interest rates fall. The rebound should continue if China's economic slowdown is behind us. |
Wind Renewables Contracts Profitability Climate | |
RatesInterest rate expectations are central to market performance, particularly for unprofitable tech companies and heavily shorted stocks. If rates stay higher for longer due to Red Sea shipping disruptions and inflation pressures, junk stocks face significant risk after their Q4 rally following Fed dovish signals. |
Fed Inflation Tech Unprofitable Shipping | |
| 2023 Q3 |
Battery Supply ChainBTRY's thin-film solid-state battery technology represents a potential breakthrough that could run ten times longer than lithium-ion batteries. The technology uses stacked thin-film cells manufactured through vacuum coating, offering advantages including non-flammable design, faster charging, and better temperature resistance for aviation applications. |
Solid-state Thin-film Energy storage Manufacturing Aviation |
Energy TransitionThe shift from lithium-ion to solid-state battery technology could accelerate electrification across transportation sectors. Toyota's commitment to launch solid-state car batteries by 2027 with 745-mile range signals broader industry adoption, while BTRY's technology could enable electrification of aircraft and drones previously considered impossible. |
Electrification Transportation Automotive Aviation Technology transition | |
LithiumContrary to expectations, solid-state batteries actually use approximately 35% more lithium than lithium-ion batteries, suggesting lithium demand will increase rather than decrease as the new technology gains adoption. This finding surprised the author who initially worried about negative impacts on lithium investments. |
Demand growth Solid-state batteries Metal consumption Supply dynamics | |
HydrogenThe development of advanced battery technology like BTRY's could potentially mark the end of the green hydrogen revolution in transportation. Green hydrogen suppliers are struggling to bring costs down to competitive levels, while improved battery performance could eliminate the need for hydrogen in many transportation applications. |
Green hydrogen Transportation fuel Cost competitiveness Technology disruption | |
| 2023 Q2 |
DemographicsThe aging populace is shifting from equities to bonds as baby boomers move from their 40s-50s wealth creation years to 60s-80s retirement years. This demographic shift will reduce equity demand and returns as older investors follow recommended asset allocation models that increase bond exposure with age. |
Demographics Aging Asset Allocation Baby Boomers Retirement |
GlobalizationInternational trade is stalling after years of expansion, with protectionist measures by G20 members creating trade frictions. This deglobalization process started post-GFC and has been accelerated by Russia's invasion and COVID-19, leading to reduced economic growth and lower corporate profits. |
Globalization Trade Protectionism Economic Growth | |
Asset AllocationInvestment advisers recommend increasing bond allocation with age, from 0-10% early career to 60% in retirement. With bonds now offering attractive yields again after years of near-zero rates, there is significant catch-up allocation from equities to bonds occurring among older investors. |
Asset Allocation Bonds Portfolio Age-Based | |
| 2023 Q1 |
LiquidityManager emphasizes liquidity as the key driver of financial markets, noting that tight liquidity in 2022 caused $23 trillion in global wealth losses despite less economic damage than the GFC. When interest rates were near zero during the QE era, abundant liquidity drove up risk asset prices as investors sought returns beyond money market instruments. |
Central Banks Interest Rates QE Capital Risk Assets |
RatesInterest rates are framed as the cost of capital and a key determinant of market conditions. The manager discusses how near-zero rates during the QE era encouraged risk-taking and drove asset prices higher, while rising rates in 2022 created challenging investment conditions and wealth destruction. |
Fed Central Banks Cost of Capital Monetary Policy | |
InflationThe manager views current inflation dynamics as manageable, noting that core PPI at 3.4% year-over-year won't cause sleepless nights at the Fed. He suggests central banks may be comfortable with inflation somewhat above 2% for debt destruction purposes, though acknowledges QE is inherently inflationary. |
CPI PPI Fed Debt Central Banks |
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