Podcast Summary: Full Signal with Phil Rosen
Episode: "Stocks are up. That’s the problem | Bob Elliott"
Date: March 18, 2026
Guest: Bob Elliott (CIO & Co-founder, Unlimited Funds; former Bridgewater executive)

Episode Overview

In this episode, Phil Rosen sits down with macro investor Bob Elliott for a comprehensive discussion on the current economic landscape—a U.S. economy shifting from income-driven to savings-driven growth, the implications of the Iran conflict and an oil shock, the Federal Reserve's policy dilemma, valuation risks in the stock market, and the importance of proper portfolio diversification in turbulent times. Elliott draws on both recent data and deep experience, including 14 years at Bridgewater Associates, to underscore why strong stock performance may not be as reassuring as it appears.

Key Discussion Points & Insights

1. Macro Overview: From Income-Driven to Savings-Driven Growth

[00:28-02:22]

• Elliott explains the U.S. economic shift: early 2026 saw a transition from "income-driven expansion" (where household income and spending drove growth) to a "savings-driven economy."
  • Slower income growth now forces households to spend from savings.
  • Government deficits and increased business borrowing contribute to a more fragile, "knife's edge" scenario.
• The new oil shock (stemming from the Iran conflict) means:
  • Higher input costs → Stubborn inflation.
  • Reduced real consumer spending (1–1.5% hit to U.S. consumption forecasted).
  • Lower probability of achieving the familiar 2%+ growth rate.
• Quote:

  “When oil prices rise a lot, that means input costs rise, which create a tough scenario...because both inflation rises ... but also real spending falls because people are spending more on gas and less on other essentials.” —Bob Elliott [01:30]

2. The Oil Shock and Iran Conflict: Lasting Effects?

[02:22-03:40]

• Oil supply disruption lingers even if conflict resolves immediately—logistical hangover means months of elevated oil/gas prices.
• Markets price in only a 50/50 chance of near-term resolution; significant risk remains for ongoing instability affecting the macro climate.
• Quote:

  “We’d probably see elevated oil prices and elevated gas prices for several months [even if Strait of Hormuz reopened now] ... If [the conflict continues], we’re really going to have a difficult circumstance given the magnitude of the oil shock.” —Bob Elliott [02:46]

3. Federal Reserve Policy Dilemma: Between Growth and Inflation

[03:40–07:13]

• The oil shock creates a dual challenge for the Fed:
  • Inflation accelerates (potentially into 3–4% territory).
  • Slowing growth and the risk of labor market softening.
• The Fed historically holds steady rather than easing during oil shocks (see 2008, 1990); might not cut rates until inflation drops back down.
• Labor market is "not weak enough" to justify aggressive cuts; unemployment between 4.2–4.4% is manageable.
• Quote:

  “The Fed cannot cut when the possibility of 4% inflation is on the horizon.” —Bob Elliott [04:47]
  “We already got almost 200 basis points of cuts ... but there’s not an urgency to cut further given where the labor markets are now.” —Bob Elliott [05:47]

4. Potential Fed Leadership Change: Kevin Warsh

[07:13–10:14]

• Warsh, expected to be “more willing to cut than Powell,” will face internal resistance; monetary policy direction still set by consensus.
• Elliott is skeptical of Warsh’s background/political connections but notes committee structure limits the impact of any single appointee.
• Quote:

  "I was hoping we wouldn't get another politically connected lawyer running the Fed...some of his language ... would be disqualifying." —Bob Elliott [07:32]
  "You're not going to get a lot of receptivity at this point to aggressive cuts." —Bob Elliott [08:29]

5. Stock Market Risks: Why "Stocks Are Up" Might Hurt

[10:14–15:06]

• Equities had strong earnings growth (mid-teens) to start 2026; market moved into the year positioned for robust returns.
• Oil shock and tighter policy now introduce significant vulnerability—“like kindling for a downturn.”
• Stocks haven’t sold off much—currently just a few percent below highs—possibly due to market “amnesia” about the effects of oil shocks (citing post-Russia/Ukraine 2022 as an example).
• Elliott sees a plausible scenario of a 10–15% drop if shocks persist—"one that basically no one's positioned for."
• Quote:

  "It does seem as though the market is having a bit of amnesia of how oil shocks play through to the stock market." —Bob Elliott [11:55]
  "Seeing a move down in stocks of 10 or 15% in response to this sort of shock ... seems like a very reasonable possible outcome." —Bob Elliott [12:51]

6. Portfolio Positioning: Diversification and Commodities

[15:06–19:53]

• Most investors (including pros) are underweight commodities; recent spikes in oil price highlight value of small allocations to oil/commodities.
• Reduce overall risk levels in portfolios—not just by shorting, but by scaling down exposure to risk assets.
• In volatile environments, “everything is riskier”—equities, bonds, gold.
• Long-term investors (20–30 year horizon) should focus on strategic, not tactical, advice—but build true diversification (not just "large caps and small caps").
• Recent decades displayed unusually low conflict-related losses—don’t base portfolios on the assumption that geopolitical risks are always minor.
• Key takeaways:
  • Diversify not just across equities but across asset classes (commodities, TIPS, gold).
  • Biggest risk isn't falling prices but “real erosion of wealth” from persistent inflation.
• Quote:

  "The biggest risk is not necessarily asset prices fall. The biggest risk is that we have persistent inflation, which erodes the purchasing power of your savings." —Bob Elliott [18:53]

7. Gold, Bitcoin, and Hard Assets

[19:53–23:23]

• Gold, since ETFs made it liquid, has performed about the same as the S&P 500, making it a straightforward case for inclusion in balanced portfolios.
• Gold has maintained real purchasing power for millennia—adding it defends against fiat debasement/inflation, especially given structural issues in developed economies.
• Crypto/BTC not as established as gold but can play a role in diversification; allocation should be modest given higher volatility.
• Quote:

  "The cost of a worker’s hour today in gold terms is basically the same as it was in Roman times ... why not have gold as part of your portfolio?" —Bob Elliott [21:13]

8. Investor Psychology: The Danger of ‘Buying the Dip’ Amnesia

[23:41–29:10]

• Many investors have forgotten—not every political/central bank crisis is immediately cushioned by easy money ("policy tacos").
• Pain (in the form of drops) must precede policy response; markets are now betting on policy solutions before pain.
• Over the past decade, the pattern was bailouts at the first sign of trouble; that may no longer hold, especially with inflation high.
• Retail investors have been right to buy the dip in recent years, but the current regime could invalidate that strategy for a while.
• Quote:

  "It’s almost like ... instead of too many drugs, [investors have] done too much QE and eaten too many tacos ... If you take the oil shock situation as an example, first there is pain and then there are policy shifts." —Bob Elliott [25:22]
  "Right now you have times when the market is down 100 basis points and people are like, it's a generational buying opportunity. I'm like, what are we talking about here?" —Bob Elliott [28:08]

9. Lessons from Bridgewater and Ray Dalio

[29:10–34:51]

• Learnings from Bridgewater:
  • Use “cause-effect” relationships to simplify and understand macro complexity.
  • Build investment logic from fundamental flows—e.g., income, savings, spending.
  • Extreme humility is essential for investors; even the very best get it right only 55% of the time.
  • Longevity (not blowing up during unlucky stretches) is key to realizing any edge.
• Quote:

  "If you have edge, what you need is sample size ... the best investors in the world have enough humility to recognize ... I might be right, I might appreciate being right in these circumstances, but I have to trade as if I might be wrong 45% of the time." —Bob Elliott [32:51]

10. Unlimited Funds: Bringing Hedge Fund Strategies to the Masses

[34:51–39:16]

• Elliott’s new venture, Unlimited Funds, builds ETFs that replicate the positioning of top hedge funds using machine learning: "gathering the wisdom of all the smartest hedge fund managers in the world ... through an ETF."
• Fees in hedge funds are “way too high.” Unlimited uses data and tech to reduce costs and democratize access.
• Their global macro ETF (HFGM) is up 50% since launch (April 2025), ranked #1 in its Morningstar category.
• Quote:

  "The problem in the hedge fund world is that managers take 50% of the returns in fees. Over the last 50 years, hedge fund managers have taken 50% of the returns in fees." —Bob Elliott [35:16]
  "We leverage our decades of experience ... to build strategies that replicate how hedge fund managers are positioned in real time and then make those strategies available for investors ... in the ETF wrapper." —Bob Elliott [36:44]

Notable Quotes (with Timestamps)

• [01:30] — "When oil prices rise a lot, that means input costs rise, which create a tough scenario...because both inflation rises ... but also real spending falls because people are spending more on gas and less on other essentials." —Bob Elliott
• [04:47] — "The Fed cannot cut when the possibility of 4% inflation is on the horizon." —Bob Elliott
• [08:29] — "You're not going to get a lot of receptivity at this point to aggressive cuts." —Bob Elliott
• [11:55] — "It does seem as though the market is having a bit of amnesia of how oil shocks play through to the stock market." —Bob Elliott
• [18:53] — "The biggest risk is not necessarily asset prices fall. The biggest risk is that we have persistent inflation, which erodes the purchasing power of your savings." —Bob Elliott
• [21:13] — "The cost of a worker’s hour today in gold terms is basically the same as it was in Roman times ... why not have gold as part of your portfolio?" —Bob Elliott
• [25:22] — "It’s almost like ... instead of too many drugs, [investors have] done too much QE and eaten too many tacos ... If you take the oil shock situation as an example, first there is pain and then there are policy shifts." —Bob Elliott
• [28:08] — "Right now you have times when the market is down 100 basis points and people are like, it's a generational buying opportunity. I'm like, what are we talking about here?" —Bob Elliott
• [32:51] — "If you have edge, what you need is sample size ... the best investors in the world have enough humility to recognize ... I might be right, I might appreciate being right in these circumstances, but I have to trade as if I might be wrong 45% of the time." —Bob Elliott
• [35:16] — "The problem in the hedge fund world is that managers take 50% of the returns in fees. Over the last 50 years, hedge fund managers have taken 50% of the returns in fees." —Bob Elliott

Important Timestamps

• [00:28–02:22]: Macro outlook; income vs savings-driven economy; oil shock impact
• [03:40–07:13]: Federal Reserve’s inflation-growth conundrum
• [10:45–13:03]: Stock market vulnerabilities; equities and oil shock
• [15:06–19:53]: Portfolio construction and diversification; commodities, inflation hedges
• [21:13–22:13]: Gold’s millennia-long role; empirical comparisons to S&P 500
• [25:22–28:08]: Investor psychology; sequence of policy change ("pain, then tacos")
• [29:34–34:51]: Lessons from Bridgewater and risk management/humility
• [34:51–39:16]: Unlimited Funds’ approach; democratizing hedge fund strategies via ETFs

Closing Thoughts

Bob Elliott offers a sober, data-driven take on why the current run up in equities masks serious macro vulnerabilities—especially in light of inflationary oil shocks and persistent policy headwinds. He presents a strong argument for moving beyond simple “buy the dip” mentalities and urges investors to embrace true diversification, humility, and a forward-looking approach grounded in cause-effect reasoning. His remarks blend technical acumen with approachable wisdom, providing actionable context for both professional and retail investors navigating the post-pandemic, geopolitically unstable marketplace.

Follow Bob Elliott: @BobbyUnlimited (social), Non-Consensus Substack, unlimitedetfs.com

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