Following Liquidity, Not Headlines
Investors are constantly searching for signals about where the market is headed — earnings forecasts, the yield curve, central bank commentary, technical levels. Yet markets manage to surprise us time and again. Maybe that’s because we’re not looking where the move actually begins.
My intuition has been guiding me toward shelter for some time now. Since writing helps clarify my thinking, I’ll try to lay out how I see the road ahead.
I read a wide range of investor perspectives, but there are only a handful I return to repeatedly — partly to better understand complex ideas, and partly because their thinking feels directionally right. (bias warning!)
One of the more resonant pointers came from an investor I respect, who led me to David Levenson (@QAGELLC). His work has reinforced much of what I’ve been considering in my own positioning.
In Levenson’s model, Bitcoin acts as a leading indicator of liquidity fading from the system. The structural rotation is underway: away from growth, risk, and volatility toward low-volatility defensive sectors. This shift shows up most clearly in Bitcoin's price action. The rotation is already in motion, tightening its grip on software companies and likely spreading more broadly across risk assets. This choppy rotation could continue for months before any potential capitulation phase. The “buy the dip” mentality is slowly beginning to fade.
As the rotation potentially accelerates, it may also be worth taking a moment to consider the ability of technology companies to build future innovations - and the massive data centers behind them - in the current geopolitical environment. Without critical minerals, the buildout simply doesn’t happen. Capital may first need to flow into undervalued materials.
A large share of capital today is anchored in ETFs. If sentiment worsens to the point where investors begin withdrawing from those core holdings, the shift from selective selling to “sell everything” behavior could drain liquidity from the largest index weights and trigger a broad selloff. There is, however, a clear silver lining: in a broad selloff, even high-quality future winners tend to be pushed to distressed levels. That creates compelling opportunities for those who, in the darkest moments, still have liquidity - and conviction.
Stayin' Alive.
The fading of liquidity and leverage from risk assets is largely the result of the end of the cheap-money era. AI itself may also reduce capital intensity, eroding the traditional capex cycle. At the same time, despite expectations of rising unemployment in 2026, consumer spending remains resilient (higher-income households continue spending while lower-income consumers struggle)
I haven’t been in the markets long enough to speak from deep experience about the speed and direction of cycles - and history doesn’t always offer clean answers anyway. Intuitively, it feels like markets need to clear out excess liquidity from time to time, and that the coming rotation is simply one healthy and necessary phase in the current cycle.
I try to stay flexible in my thinking and avoid locking myself into any single “truth.” My goal in investing is to grow my wealth, not to be right every time. Even if Levenson appears exceptionally insightful, markets can surprise him too. There are also plenty of thoughtful opposing views on the rotation thesis, some arguing the correction has already run its course.
At the moment, most of my investments are largely in:
- Tungsten
- U.S. Chemicals
- Oil
Tungsten will likely remain a core holding for quite some time — unless the valuation of the target company (ASX:EQR / EQ Resources) re-rates faster than expected.
I also see U.S. chemical companies as well positioned both for the current geopolitical backdrop and for the ongoing sector rotation.
Oil is a bit more complicated. I see the geopolitical setup roughly like this: China controls much of the metals value chain, while the U.S. is trying to control oil. I entered the oil trade when the U.S. began moving assets toward the Strait of Hormuz. Washington may be aiming to make oil more expensive and less reliable for China. Hoping for escalation is obviously not the strongest foundation for an investment decision, but I do see other supportive drivers for oil as well - or at least I thought I did.
Oil companies have already moved up somewhat and would likely rise further if tensions escalate. That said, I’m no longer sure oil has compelling longer-term tailwinds on its side, even though I originally intended the trade to be longer term.
It's possible I’ll reallocate my oil exposure in the near future toward something safer in the low-beta space - such as utilities or consumer staples, which have held up well during the defensive rotation. I’ve also found myself growing more interested in shifting toward U.S. homebuilders, particularly in Republican-leaning regions like the South and Midwest, where affordability trends, potential policy tailwinds, and regional strength could provide upside.
Forecasting is hard - especially the future. No one can know the exact top or bottom before it happens, but there’s no harm in trying to understand the direction and pace of change - even roughly.
As a European, for example, I don’t know exactly when our continent will truly bottom, but the direction seems clear. The pace of change will depend on election outcomes and many other variables that are difficult to define in advance. By the time war starts to feel rational, we’re probably near the lows. Hopefully, though, the ship turns well before it ever comes to that.
In the meantime, I plan to stay liquid, stay flexible, and let the cycle unfold — with most of my investments in the U.S.
Writing in English may end up becoming my unofficial Duolingo replacement - surprisingly natural for a Finnish boomer who speaks decent rally English.
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