Excess Returns Podcast Summary

Episode: 100% Out of US Stocks | Andy Constan on AI, War Risk and the Shift Abroad

Date: March 3, 2026
Guest: Andy Constan, Founder – Damp Spring Advisors
Hosts: Jack Forehand, Justin Carbonneau, Matt Zeigler

Episode Overview

This episode features a deep, nuanced conversation with veteran macro strategist Andy Constan. The talk spans dissecting global risk—from geopolitical shocks to artificial intelligence, macroeconomic outlook, and a notable portfolio move: Andy's shift entirely out of US stocks. The episode emphasizes critical thinking, skepticism about confident forecasts (especially around AI and geopolitics), scrutiny of market narratives, and practical frameworks for investors coping with today's uncertainty.

Key Discussion Points & Insights

1. How to Think About Geopolitical Shocks and Market Responses

Key Segments: [01:17–14:11], [23:05–26:05]

• Fading Geopolitical Risks: Andy opens by stating, “I generally think geopolitical change is something you want to fade. Do the events in the Middle East have any impact on the US economy? The answer is not much.” ([01:17])
• A Framework for News Consumption: He shares a framework for vetting information sources during times of crisis:
  • Discard self-proclaimed experts with no base of knowledge, especially if highly confident.
  • Be wary of politically-biased experts (red flags).
  • Value genuine experts who remain humble about uncertainty.
  • Beware of overconfidence—even among those with experience.
  • “Ideally I find a person that has good thinking ability and good experience and has low confidence in their views.” ([09:46])
• Probabilities vs. Possibilities: Andy recommends thinking in terms of “what are the possibilities?” and avoiding precise probability assignments since markets aren’t that predictable.
  • “It’s a little better to say, hey, there are a bunch of possibilities. Then people are immediately asked, well, what’s the probabilities? ... But also one that people then express with more confidence than they probably ought to.” ([11:42])
• War and Market Impact: Andy dissects the then-current Middle East turmoil by outlining:
  • Possible paths: quick de-escalation, longer conflict, or further escalation.
  • Asset price reactions (oil, stocks, gold, VIX) mostly priced in limited risk.
  • Real impact: “Not much has changed and we still have great uncertainty. ... If there was a dislocation, I would have seized upon it—but for now, I’m pretty much sitting on my hands.” ([23:16])

2. AI: Productivity Boon, Bubble, or Disruption?

Key Segments: [30:00–45:36]

• Embracing Uncertainty: Referencing widely-circulated articles on AI (including Citrini’s “doom” scenario), Andy insists none of the pundits know the long-term economic effects:
  • “No one knows ... it’s really actually much more healthy to say, instead of trying to nail down what the future of AI is for productivity, it’s just saying, well, what’s happening now?” ([30:36])
• Historical Analogy: Andy likens AI anxieties to the rise of the PC and the internet, recalling that new tech disruptions are nearly always followed by societal adaptation.
• Who Gets the Pie? Andy sharpens focus on how added GDP from AI is distributed (winners and losers):
  • “Even if they take share and GDP grows, there’s just not enough support for all of the tech companies that are priced the way they are to all win... There are going to be some great winners, there are going to be some disasters. And in aggregate, we’ve probably over-allocated the GDP available to these entities.” ([37:38])
  • “The producers sell a show to their investors called, I think it was called ‘Springtime in Germany’ ... They oversell it. ... I feel like there’s a lot of that going on right now.” ([39:22])
• Funding Future Promises: A major risk Andy tracks is the ballooning promises for AI-related capex and government policy:
  • “The promises that are made on AI spending, foreign direct investment in factories and government deficits require somebody to lend the money ... and those promises have massively increased.” ([40:38])
• Credit Market Capacity: Andy monitors early signs of strain: e.g., Meta halting buybacks to fund capex, jumbo new issues from Oracle, and equity issuance.
  • “You’re getting also a lot of corporate debt and you’re starting to see some tweaks on that. ... But then I look at issuance and say it still has to come to the market and get funded cheaply or else the growth doesn’t come.” ([43:57])

3. Macro Outlook: Growth, Inflation & Data Quality

Key Segments: [45:50–52:32]

• What’s Driving Growth Now?
  • Recent robust growth surprised Andy, primarily driven by fiscal stimulus (e.g., capex-friendly policy, “OBB” stimulus), resilient consumption, and the Fed easing (ending QT and buying bills).
  • “By and large the economy’s doing well and inflation is staying sticky for that reason.” ([47:35])
• Skepticism on Data: Andy is wary of both hard and survey data, citing a widening gap and politicization:
  • “We had the best data quality in the world, which is not that great. The rest of the world just sucks versus our data. But it’s gotten worse.” ([48:41])
• Asset Implications: Equities are still priced for strong growth; bonds are less convinced.

4. Portfolio Shift: 100% Out of US Stocks

Key Segments: [52:32–59:00]

• Bridgewater’s Four Boxes: Andy draws on the All Weather approach—pro/anti-growth, pro/anti-inflation assets.
• Foreign Bonds Now Investable: A recent surge in Japanese and European yields makes international “risk parity” portfolios attractive again (whereas foreign bonds offered no yield for years).
  • “...I started lightening up in January, did again in May, March I guess, and just have continued to lighten up until now I’m fully out of the US and that trade has worked magnificently.” ([55:13])
• Currency as a Driver: “Some of those are local Japanese people. Some of them are international investors like Warren Buffett. You need yen to do that trade. ... So part of its currency appreciation and the currency is appreciated nicely.” ([57:08])
• Timely, Not Political: Andy’s move is rooted in flows, diversification, and relative opportunity, not valuation or politics.
  • “...It isn’t any values thing, it isn’t any political thing. It’s just like everybody already owns all they could possibly want of US assets and rest of world assets aren't bad.” ([58:20])

5. The “Trump Accounts” for Babies: Gimmick or Genius?

Key Segment: [60:32–66:20]

• Fiscal Perspective: Andy dismisses the impact of newborn investment accounts as a “gimmick” ($12 billion in total):
  • “The high takeaway from this is it’s a gimmick. It doesn’t matter at all in any possible way you could possibly think of. And it’s 100% a gimmick.” ([61:37])
• Wealth Transfer Mechanics: He questions the wisdom of government debt-funded stock investments, citing alternative (and likely better) ways to improve youth financial literacy or transfer wealth.

6. What Andy’s Watching Closest

Key Segment: [66:35–67:30]

• Top Priority: “Number one, it’s the ability for the very large promises being made to be funded with equity and debt and what that costs when it hits the market. By far that’s the most important thing to me. I can’t think of something that’s even close to that.” ([66:35])
• Fed Less Important, For Now: The ability to fund new promises (corporate and government) will be the crucial determining factor for market direction.

Notable Quotes

• On Overconfidence in Experts:

  “Ideally I find a person that has good thinking ability and good experience and has low confidence in their views. So that’s what I’m looking for when I look out on the world and it’s very hard to find…”
  — Andy ([09:46])

• On Market History after Wars:

  “The only time it really is, is meaningful. Like meaningful things happen is when you lose a world war. Your country gets pretty fucked up if you lose a world war. And there have been two of them, so the rest of it noisy, not something you can depend on.”
  — Andy ([28:12])

• On Current AI Valuations:

  “There’s just not enough support for all of the tech companies that are priced the way they are to all win.”
  — Andy ([37:38])

• On Funding Promises:

  “The promises that are made on AI spending, foreign direct investment in factories and government deficits require somebody to lend the money to the people that are going to do that spending. And those promises have massively increased.”
  — Andy ([40:38])

• On Shifting Out of US Stocks:

  “Until January of last year, I owned 100% of my personal beta portfolio in US stocks and bonds… I started lightening up in January, did again in May… and now I’m fully out of the US and that trade has worked magnificently…”
  — Andy ([55:13])

• On the “Trump Accounts”:

  “The high takeaway from this is it’s a gimmick. It doesn’t matter at all in any possible way you could possibly think of. And it’s 100% a gimmick.”
  — Andy ([61:37])

• What Matters Most Going Forward:

  “The very large promises being made to be funded with equity and debt and what that costs when it hits the market. By far that’s the most important thing to me. I can’t think of something that’s even close to that.”
  — Andy ([66:35])

Important Timestamps

• [01:17] – Andy begins with a high-level view on fading geopolitical risk
• [04:07–09:46] – Framework for critical thinking, vetting experts
• [14:11–22:04] – Real-time process for assessing Middle East turmoil and market reaction
• [23:05–26:05] – Why big historical patterns don’t reliably predict investment outcomes
• [30:36–45:36] – Deep-dive on AI, allocation risk, and funding
• [52:32–59:00] – Case for shifting out of US stocks, driven by fixed income dynamics
• [61:37–66:20] – The “Trump Accounts” discussion and why policy mechanics matter
• [66:35] – Final takeaway on what Andy’s watching most closely: funding all these promises

The Episode in a Nutshell

Andy Constan lays out a master class in macro investing, critical skepticism, and humility in the face of uncertainty. Rather than getting seduced by confident predictions or chasing narratives, he studies underlying flows: who’s funding what, where stress is building, and how to tune out noisy opinions in favor of process and preparation. His current portfolio is entirely out of US stocks, not due to valuation or political bias, but because the risk-reward has finally shifted after decades of US dominance—and he’s vigilant for the cracks that may show as the world tries to fund ever-increasing tech and government ambitions.

Andy’s essential insight:

“The most important thing to me, by far, is the ability for the very large promises being made to be funded with equity and debt and what that costs when it hits the market.”

For Further Learning

• Follow Andy’s process videos and macro frameworks at Damp Spring Advisors.
• Hosts: Excess Returns Podcast Archives.