SI399: AI, Inflation and the Portfolio That Refuses to Sit Still ft. Alan Dunne

In this episode of Top Traders Unplugged, Niels Kastrup-Lasen and guest Alan Dunne dive deep into the complex macroeconomic forces reshaping global markets, focusing on the dual shocks of artificial intelligence (AI) and the Middle East conflict. Dunne highlights how AI is creating a powerful but distorted economic narrative—boosting productivity and driving massive CAPEX spending, particularly in data centers, yet simultaneously distorting earnings, labor share, and inflation data. At the same time, the war in the Middle East acts as an adverse supply shock, pushing energy prices higher and fueling stagflationary pressures. Dunne argues these two forces—AI’s deflationary supply boost and energy-driven inflation—are colliding in a way never seen before, creating unprecedented uncertainty for policymakers and investors alike. The episode also explores how trend following strategies are adapting to this volatile environment, with Dunne revealing the launch of the 'Regime Adaptive Fund,' a new product that integrates strategic asset allocation with adaptive tactical strategies like trend following and return stacking. This fund aims to deliver true portfolio resilience by allowing dynamic, rule-based responses to structural market shifts, offering a more robust alternative to traditional multi-asset portfolios. The conversation underscores the importance of embracing discomfort in investing, recognizing that diversification doesn’t eliminate risk but shifts the nature of it—replacing the fear of a single catastrophic drawdown with the periodic pain of 'death by a thousand cuts' across multiple strategies. The episode concludes with a forward-looking perspective on portfolio construction, emphasizing that in today’s deglobalized, high-velocity markets, predictive models are less effective than systematic, adaptive approaches. Dunne and Kastrup-Lasen stress that the most valuable portfolios aren’t those that predict the future, but those that are prepared for what can’t be predicted. Key takeaways include: (1) AI’s impact on the economy is real but complex—boosting growth while distorting data and increasing energy demand; (2) the coexistence of AI-driven deflation and energy-driven inflation creates a unique macro regime that demands adaptive investing; (3) trend following is not just a standalone strategy but a powerful, transparent tool for tactical asset allocation; (4) return stacking—combining equities with trend following—can enhance risk-adjusted returns; (5) true portfolio resilience comes from embedding adaptive strategies like trend following within a core strategic allocation; (6) investors must accept that all strategies come with discomfort, but the right framework can manage it effectively; (7) the new Regime Adaptive Fund represents a practical, institutional-grade solution for high-net-worth investors seeking adaptive, all-weather performance; and (8) in an era of market volatility and structural change, the best defense is a portfolio that refuses to sit still.