Superinvestors and the Art of Worldly Wisdom

Episode #59: Vincent Deluard On The Paradigm Shift In Markets

Host: Jesse Felder
Guest: Vincent Deluard
Date: May 21, 2025

Overview

In this stimulating episode, Jesse Felder sits down with Vincent Deluard, Director of Global Macro Strategy at Stonex, to explore the ongoing "paradigm shift" in global markets. Deluard has built a reputation for calling major macro trends—particularly around inflation, policy, and market structure—well ahead of consensus, and this conversation digs into the intellectual framework and data-driven process behind his thinking. The discussion traverses the transformation from the disinflationary 2010s to an era defined by high deficits and persistent inflation, the erosion of social trust, and what this all means for asset allocation and portfolio construction going forward. Deluard's witty, global perspective—rooted in history and unconventional data sources—offers both actionable insights and plenty of food for thought.

Key Discussion Points & Insights

Vincent Deluard’s Background & Macro Approach

[02:10 – 09:20]

• Deluard shares his unlikely trajectory from small-town Burgundy, France, toward global macro, shaped by early curiosity about currencies and coins, and a detour from French public service into Wall Street research.
• Major career stops: equity research in Sausalito, Ned Davis Research (where he built their Europe product), and later, being tasked with starting global macro analysis at Stonex.
• Macro appeals for its multidimensionality: "If you want to do macro well, you have to be curious about energy policy, geopolitics, fiscal policy, even social changes." (B, 08:11)
• Memorable moment:

  "I couldn’t think of anything further away from capital markets... collecting all the schillers and liras and drachmas and pesetas... In the same way American kids collect baseball cards." – Vincent Deluard (B, 02:10)

The Foundation: Fiscal over Monetary

[10:04 – 16:01]

• Deluard’s out-of-consensus calls—the persistence of inflation post-COVID, no US recession in 2022—grounded in economic history and a laser focus on fiscal policy.
• Notes the overemphasis on monetary policy post-1980s, now seeing a return to fiscal dominance:

  "For the longest time, monetary policy was not separate from fiscal policy... what drives money creation, aggregate demand and the economic cycle at large is the government, and within the government, fiscal policy, and that monetary policy is just subservient to it." (B, 10:04)

• Unconventional data: Deluard relies on the Daily Treasury Statement (DTS) to track money flowing into and out of the US Treasury daily, eschewing unreliable surveys.

  "With the tax collection, it’s hard cash moves every day and it covers everybody." (B, 12:30)

• The fiscal explosion post-COVID (stimulus) was obvious when following these real-time cash flows.
• Quote:

  "We are constraining demand, controlling supply, we’re breaking down supply chain, we’re paying people to stay at home. And people think this is deflationary. I mean, what is wrong?" (B, 15:26)

The “Sea Change” — End of Disinflation

[16:51 – 25:34]

• Outlines the extraordinary 40-year cycles in yields and inflation (referencing Jean Grant’s work), identifying 2021 as the secular low in yields and dawn of a new inflationary era.
• Historical drivers:
  • The great disinflation driven by demographics (boomers and millennials both working), globalization, and undervalued emerging market currencies in the 90s/2000s (especially China), and supply-side policy tailwinds.
  • Policy lag: "We have policymakers still fighting the last war." (B, 21:00)
• The 2020s marked by:
  • Demographic reversal (boomers retiring = structural deficits)
  • The exhaustion and reversal of globalization’s disinflationary effects
  • Policy mind-set shift: now authorities are hyper-sensitive to growth shocks, readily deploying stimulus or neglecting inflation risks
• Notable observation:

  "We have this hyper-sensitivity to anything that may lower growth and... a disregard for inflation." (B, 24:23)

Social Trust, Institutions, and Inflation

[25:34 – 34:22]

• Deluard draws a direct line from inflation trends to changes in societal trust and the credibility of institutions.
• Cites studies (the "wallet experiment") linking higher social trust to lower inflation (B, 26:51).
• Anecdotes from Latin America: persistent "ghost in the wire" inflation attributed to lack of societal trust in contracts, government, etc.

  "Inflation is ultimately a question of trust." (B, 27:13)

• In the US, eras of high trust (50s) = low inflation; declining trust (70s, currently) = rising inflation.

The Fed’s Role and Fiscal Dominance

[31:05 – 39:24]

• The Fed has consistently missed its inflation target for nearly five years.

  “Their true mandate is to ensure that inflation stays high enough to accommodate the Treasury spend and deleverage the economy, but not so high as to start an inflationary spiral.” (A, 31:31 paraphrased)

• Fiscal math: With 7% GDP deficits, low population growth, and mediocre productivity, sustained higher inflation is seen as the "plug" to stabilize debt/GDP.
• Fiscal determines inflation, monetary policy accommodates it—an inversion of textbook dogma.

The Age of Persistent, Rolling Inflation

[35:08 – 41:32]

• Inflation comes in waves; multiple “transitory” shocks in succession may actually constitute a secular trend.

  “A forest is nothing but a collection of trees, a symphony is nothing but a sequence of musical notes... If you have a sequence of one-time adjustments in the price level, repeating in very close succession, pretty much looks like secular inflation to me.” (B, 37:42)

• Restoration of a low-inflation regime would require deep, painful reform—akin to Brazil’s or Peru’s long efforts to subdue chronic inflation (B, 39:24). The US currently lacks both the policy resolve and new intellectual framework.

Parallels with the 1970s and EM-Style Risks

[42:05 – 50:13]

• The US increasingly resembles an emerging-market-style balance of payments crisis:
  • Persistent deficits
  • Loss of foreign funding appetite
  • Higher yields, dollar weakness vs. gold and other currencies

  "If this were a large country in Latin America, we’d recognize all the signs." (B, 42:05)

• Cites the Nixon shock (1971) and the imposition of across-the-board tariffs as a historical parallel.
• Warns that the US’ diminished global stature, lack of goodwill, and less impressive talent pool make it harder to “pull off” drastic system resets now.

Implications for Investors: The New Playbook

[50:13 – 54:41]

• Sticking to the old playbook (long Treasuries, mega-cap growth, 60/40) risks 1970s-style wealth erosion:

  “If you kept your intact portfolio from the late 60s... by the end of the decade your Treasuries in real term had lost probably 50% of the value.” (B, 50:17)

  • Simultaneous equity & bond declines: Negative correlation (“diversification”) breaks down.
• Deluard’s favored trade: Long TIPS, short TLT (i.e., long inflation-protected Treasuries, short nominal long bonds).

  “My view is actually this environment is not that bad for stocks, but it’s really bad if we try to get out of it.” (B, 35:08)

• Break-even inflation trades offer stable, attractive risk-reward and are underutilized by US investors.

Equities: Why Energy Stands Out

[54:41 – 60:17]

• Energy sector is the only domain that continues to price in recession; this creates opportunity as the sector trades at very cheap multiples.
• Secular environment of “no recession” (constant fiscal stimulus, policy hyper-reactivity).
• Macro thesis: Deglobalization and reshoring will paradoxically raise energy consumption (less efficiency in supply chains, more shipping by less efficient means, rearmament in Europe, China’s domestic consumption rising).

  “As we bring back production, we may have this paradoxical world where the energy needs of the world are actually higher...” (B, 59:35)

Worldly Wisdom & Personal Interests

[61:05 – 65:13]

• Deluard credits Latin and Stoic philosophers (Seneca, Epictetus, Marcus Aurelius) studied in school as deeply influential to his mindset as an analyst.

  “The values of patience, not being emotional, analyzing things rationally... it really translates into portfolio management.” (B, 62:30)

• Recommends Meditations by Marcus Aurelius and Seneca’s Letters to Lucilius.

Notable Quotes

• On Macro’s All-Encompassing Nature
  • “If you want to do macro well, you have to be curious about energy policy, geopolitics, fiscal policy, even social changes.” (B, 08:11)
• On Fiscal Dominance
  • “Fiscal policy is really the master here... monetary policy is just subservient to it.” (B, 10:04)
• On Inflation and Social Trust
  • “The more you are able to trust a stranger to return your wallet, the less inflation you have. Inflation is ultimately a question of trust.” (B, 27:13)
• On US vs. EM Parallels
  • “If this were a large country in Latin America, we’d recognize all the signs.” (B, 42:05)
• On Old vs. New Investing Playbooks
  • “If you have a sequence of one-time adjustments in the price level, repeating in very close succession, pretty much looks like secular inflation to me.” (B, 37:42)

Timestamps for Key Segments

• Vincent Deluard’s Background & Path: [02:10 – 09:20]
• Macro Foundation—Fiscal > Monetary: [10:04 – 16:01]
• Structural Shift in Inflation & Policy: [16:51 – 25:34]
• Social Trust, Institutions, and Inflation: [25:34 – 34:22]
• Deficit Risks & Fed’s Dilemma: [31:05 – 39:24]
• Inflation’s Narative Shift & Institutional Reform: [35:08 – 41:32]
• Parallels to the 1970s, EM-Style Balance Risks: [42:05 – 50:13]
• Implications for Investors, New Portfolio Anchors: [50:13 – 54:41]
• Equity Sector Views, Energy Thesis: [54:41 – 60:17]
• Worldly Wisdom & Stoicism: [61:05 – 65:13]

Additional Resources & How to Follow Vincent Deluard

• To access Vincent’s research: Be a client of Stonex and ask your sales rep, or sign up for his public newsletter (details and trial linked from his Twitter @VincentDeluard).
• Recommended authors:
  • Marcus Aurelius – Meditations
  • Seneca – Letters to Lucilius
• Twitter: @VincentDeluard

For additional links, charts, and research mentioned in this interview, visit: thefelderreport.com/podcast.