ALO32: AI Booms, Fiscal Strains and the New Macro Regime ft. Joe Little

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Dec 3, 2025

In this discussion, Joe Little, Global Chief Strategist at HSBC Asset Management, delves into the shifting macroeconomic landscape. He highlights the transition to a supply-constrained regime, where inflation is becoming a sticky challenge. Joe also explores AI's potential as an investment boom, the implications of fiscal dominance, and the complexities of emerging markets. He shares insights on portfolio strategies, emphasizing the need for diversification and adapting to a multipolar world, as well as the nuanced dynamics affecting the dollar.

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ANECDOTE

From Economist To Global Strategist

Joe Little describes his career path from studying economics to working at JP Morgan and then moving to buy-side strategy.
He frames markets as a laboratory for testing macro ideas and investment theses.

INSIGHT

China's Recovery Is Policy-Led And Regional

China and Asia show policy-driven recovery, regionalisation and a shift from deflation toward gradual reflation.
Targeted fiscal and industrial policy are central to China's rebalancing and growth outlook.

INSIGHT

The Reverse Bond Conundrum And Fiscal Risks

Long-term yields have risen even with expected rate cuts, creating a 'reverse bond conundrum' and higher term premia.
That pattern signals fiscal concerns and a potential return of fiscal dominance in markets.

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Alan Dunne speaks with HSBC Asset Management’s Global Chief Strategist, Joe Little, about what happens when the old macro rules stop working. Joe traces the shift from a demand led, low inflation world to a supply constrained regime of sticky and spiky prices, where 2 percent becomes a floor rather than a target. He explains the “reverse bond conundrum,” rising term premia and the quiet return of fiscal dominance. The conversation explores AI as investment boom, not yet productivity cure, the maturing of emerging markets, the fate of the dollar and how to build truly multipolar portfolios.

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Episode TimeStamps:

00:00 - Opening clip, long bonds misbehaving and the “reverse bond yield conundrum”

00:55 - Introduction and risk disclosure for Top Traders Unplugged listeners

01:50 - Joe’s path from economist to global chief strategist and house view author

05:16 - From post crisis disinflation to a supply constrained, sticky inflation regime

10:32 - Why 2 percent looks like a floor, tariffs, profits and delayed inflation effects

13:34 - 2026 baseline: muddle through growth, positive policy impulse and inflation nuance

16:42 - AI as capital expenditure boom, echoes of the 1990s and the missing productivity surge

20:40 - China and Asia: regionalisation, industrial policy and an exit from deflation

24:54 - Role reversal in 2025 and why future Asian performance must be earnings led

27:22 - Debt, deficits and fiscal dominance, from UK gilts to French OATs and US Treasuries

31:34 - Steeper curves and rising term premia, how the bond market can “murder” the cycle

32:26 - Rethinking 60/40, weaker bond diversification and the case for “diversifying diversifiers”

35:32 - Hedge funds, macro and why emerging markets may now be structurally less fragile

37:13 - Can EM really decouple, and what India versus China tells us about country effects

41:59 - Dollar overvaluation, policy preference for weakness and the fading of the dollar smile

47:27 - Fed succession, populism, and why 2 percent inflation will not feel like a ceiling

51:23 - Gold’s rise, stock bond correlation and the search for genuine risk mitigators

53:53 - Investor sentiment, nervous equilibrium and how institutions are repositioning risk

58:00 - Ten year return assumptions and constructing multipolar, all weather portfolios

01:02:04 - Book recommendations, learning macro and closing reflections

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