Last year was a waiting game. As David Einhorn put it in his recent fireside chat with Skagen, “We spent most of the year waiting to figure out who the next president of the United States was going to be.” Now that the political dust has settled, one might assume that clarity would follow. Yet, as Einhorn observes, “Things are even more uncertain this year than they were last year because you have no idea what this guy’s going to do.”
This is the paradox of our current moment. We have more knowns—an elected leader, a transition in progress—but fewer certainties. Markets crave predictability, yet we find ourselves in a landscape where policy direction remains elusive.
“All of a sudden, it appears that U.S. policy is focused on territorial expansion,” Einhorn notes, a development that caught even seasoned observers off guard. But does that signal a true shift in policy? “It doesn’t mean that any of those things are likely to happen. The whole thing could be a distraction… or he has no idea what he’s going to do.”
For investors, this means embracing uncertainty as the defining feature of the current cycle. The challenge is not just deciphering political signals but also understanding an economic environment where valuations are stretched thin.
“The market is about the most expensive that it’s ever been in the history of the time that I have been managing the fund,” Einhorn warns. With risk premiums at “roughly zero versus government bonds,” equity investors are not being compensated for their exposure.
This does not necessarily mean an imminent market crash, but it does suggest that prudence is warranted. “We go in with the view that the market is really expensive,” Einhorn explains, leading him to favor “a relatively low gross and a relatively low net” while seeking opportunities in individual stocks.
Beyond valuations, macroeconomic forces are shifting. Einhorn is convinced that “inflation has bottomed again,” arguing that “we’re on a policy trajectory towards a re-acceleration of inflation.” If this view holds, it will have profound implications for monetary policy, asset allocation, and risk management in the year ahead.
For investors navigating 2025, the takeaway is clear: the ground beneath us is shifting, and the usual playbook may not apply. Forecasting in this environment is, at best, a game of probabilities. As Einhorn reminds us, “It is very hard to figure out what’s going to happen,” but having a set of core beliefs and remaining adaptable is key. In times of uncertainty, the best strategy may be to prepare for multiple outcomes—and to resist the illusion that the future is any more predictable than it ever was.
You can watch the entire virtual fireside chat here:
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