Weekly Comment

The U.S. economy grew at a 1.4% annualized rate in the fourth quarter of 2025, below expectations, as the government shutdown weighed on spending and exports. For the full year, growth came in at 2.2%, down from 2.8% in 2024.

Meanwhile, core inflation rose to 3% year over year in December, remaining above the Federal Reserve’s target.

Private demand analysis

Although the headline GDP figure was weak, private demand showed resilience: final sales to private domestic purchasers increased 2.4% and private investment rose 3.8%. The main drag came from federal government spending.

With inflation still elevated, the Fed is likely to maintain a cautious stance before considering further rate cuts.

Implications

At the same time, core inflation reached 3%, still above the Federal Reserve’s target. While the headline growth figure was soft, private demand and investment showed resilience. The overall backdrop suggests the Fed will remain cautious in the months ahead.

Source: Bureau of Economic Analysis, Bloomberg

Understanding the Diversity of Alternatives: From Real Estate to Crypto

One of the most common questions I get from new team members or family principals is deceptively simple: “What exactly do you mean by alternatives?”

It’s a fair question. “Alts” is a broad label that covers everything from core real estate to crypto tokens.

But in my experience—both at a pension fund and now at a family office—how you classify and organize the alt universe shapes how you build, manage, and ultimately compound capital through it.

At AWM, we use a framework that breaks the space into ten categories: private equity, private debt, real estate, infrastructure, venture capital, hedge funds, secondaries, crypto, co-investments, and direct deals. It’s not perfect, but it’s practical—and it helps ensure we stay thoughtful about the role each bucket plays.

Core Categories: Income, Inflation Protection, and Growth

Private equity and venture capital are the long-term growth engines. PE focuses on improving mature businesses, often over 5–10 years, while VC backs early-stage, high-upside companies. Both are illiquid, high-risk, and long-duration—but also the best shot at accessing true alpha from private markets. They don’t generate regular income, and inflation protection is indirect, but they’re crucial for long-run compounding.

Private debt, on the other hand, is more about steady income. Direct lending, real estate credit, and asset-backed strategies can offer attractive yields, especially when structured with floating rates—which can help when inflation and rates are rising. But credit selection and downside protection become even more critical in downturns.

Real estate and infrastructure are classic “real assets.” They tend to shine during inflationary periods because rents, tariffs, and replacement costs rise with prices. Income streams are often contracted and predictable. Infrastructure—especially in regulated utilities, transport, and digital infra—offers particularly bond-like cash flows, but with the added benefit of tangible asset backing.

Strategy-Oriented Exposures and Portfolio Tools

Hedge funds are more about strategy than asset class. Some seek diversification through macro or market-neutral exposures. Others focus on yield via credit or arbitrage. In my pension fund days, we leaned on certain macro and quant managers for downside protection when rates and equities were both challenged. But dispersion is wide, and fees can erode value quickly without tight underwriting.

Secondaries are a portfolio construction tool. They offer accelerated deployment, discounted entry, and vintage diversification—especially helpful when building a new program. They’re not a direct inflation hedge, but they provide flexibility and cash flow smoothing, which helps in overall planning.

Co-investments and direct deals are where concentrated views meet deep alignment. In our framework, they sit on top of a primary-led core, and we only pursue them after years of building GP relationships and in-house diligence capabilities. They can enhance returns, especially when done with low fees and strong control, but they require more time, judgment, and risk management.

Emerging Exposures and the Role of Crypto

Cryptocurrencies are firmly in the alt category now. We treat crypto as a satellite position—small, high risk, and with a very different return driver. Bitcoin may be “digital gold” in theory, but in practice its behavior has varied across regimes. For us, crypto is less about inflation hedging and more about optionality on new infrastructure and asset paradigms. It’s not core, but it’s worth understanding.

Pulling It All Together

This classification helps us design portfolios where:

• Core real assets and private credit deliver income and inflation resilience
• Growth strategies like PE, VC, and directs aim for long-term capital appreciation
• Tools like secondaries and co-invests improve pacing and net returns
• Satellites like hedge funds and crypto add diversification and idiosyncratic upside

The Takeaway

In alternatives, how you organize matters almost as much as what you invest in. A clear, working taxonomy makes better decisions easier: where to lean in, where to stay cautious, and how to sequence capability development. That’s what turns a collection of deals into a real portfolio.

Source: AWM Internal Analysis

The nomination of Kevin Warsh as the next Chair of the Federal Reserve marks an inflection point for U.S. monetary policy. While he has recently signaled a more pro–lower rates stance, his track record points to a pragmatic, data-dependent approach.

Economic context

With a softening labor market, inflation still above target, and a politically sensitive backdrop, the Fed faces complex decisions. Current signals suggest rate cuts will continue gradually, guided more by economic fundamentals than political pressure.

Market implications

A change in Fed leadership does not automatically imply a loss of independence. Even with a potentially more flexible stance, investors should maintain a long-term investment mindset focused on value creation across market cycles.

Volatility is likely to remain a relevant factor if markets perceive deviations from the Fed’s traditional mandate. This is an environment that calls for careful analysis and a long-term perspective from investors.

Source: Capital Group, Brookings, Federal Reserve

Although Bitcoin was pioneering and revolutionary, its role as the foundation of a global financial system reveals key limitations that merit careful consideration.

Structural limitations

Bitcoin by its nature is limited to only 21 million coins. If we were able to mine them faster (quantum computing, I’m looking at you) or we run out (2150’s according to latest estimates), we will experience a crash akin to the silver boom of the 1850’s or the gold scarcity of the early 1900’s. This is giving away a powerful stabilization tool, i.e. monetary policy, to the quickness of mining. Relying on an external force to underpin global stability ends in catastrophe.

While the narrative of decentralized freedom of the individual against corrupt forces trying to control the world is a great story, life is more nuanced than that and underpinning the stability of the world’s economy to the mining and availability of bitcoin seems foolhardy to me. If bitcoin is cash and cash is bitcoin, any loss of bitcoin will mean a permanent loss of cash. So if someone were to mistakenly discard a hard drive, all of us collectively would have to live with less money. That is a problem, specially given our expansionary economies.

This is only highlighting a narrow issue. You have to also take into account the externalities of such a system, one of them being energy consumption in a world that is now hungrier than ever before for power, and many others which are outside the scope of this post.

The real future of cryptocurrencies

I believe in a not too distant future we will use the full benefits of crypto, decentralized ledgers, tokenization, smart contracts, and frictionless flows of capital. But I don’t think we will do it with bitcoin.

All throughout history humanity has tended to favour standardization and liquidity as they are more efficient over any other concerns when dealing with our methods of exchange for goods and services. The fungibility of gold nuggets (and its wide availability spread almost evenly worldwide) made it outcompete barter. These nuggets which in turn were displaced with coins, which were displaced by notes backed with that gold, which were displaced by debt backed by those notes backed by gold until we got to where we are today, where the exchange of services is backed by debt underpinned in trust.

To many people, the underpinning of the global economy in trust is a crazy idea born out of the lunacy derived from the Bretton Woods system, and it is true that our current economic model was partially developed at that conference. However, the idea is much older than that—about 1700 years old in fact.

Is it true that fiat money is backed by nothing? Correct, as its backing is not a tangible thing but an intangible one: trust. The world economy is fuelled by debt, which is a promise of deferred consumption in exchange for a future greater payment.

The real revolution

The big change I see derived from the crypto breakthrough is that trust can now be decentralized and assigned on an individual basis to anything and everyone around us. So in the future I could buy a car A using Z crypto which the dealer can convert to coin Y directly without having to rely on intermediaries or governments. This system will be backed both by the asset itself and the underlying expansionary coins we develop, which will be a mix of trust and asset backed.

Ironically, this would make the whole system pretty much a barter-based economy but with the fungibility, standardization, and liquidity of our current system.

In my opinion, crypto will be the foundation of our future method of exchange of goods and services, but it won’t be bitcoin.

Would love to hear your thoughts—why you think I’m right or why you think I’m wrong.

Source: Daniel Sánchez

The Federal Reserve kept its benchmark interest rate unchanged at 3.5%–3.75%, signaling a more optimistic view of the U.S. economy. The statement highlighted solid economic growth and early signs of stabilization in the unemployment rate, reducing the urgency for near-term rate cuts. 

While two members voted in favor of a reduction, the majority opted for caution amid persistent inflation pressures and a resilient labor market. The decision reinforces the Fed’s data-dependent approach to monetary policy. 

Market Implications 

Policymakers are balancing inflation control with labor market stability, avoiding premature easing. For markets, this points to a near-term period of stable rates, with the possibility of renewed cuts later in the year if inflation continues to cool. 

The tone of the statement suggests less urgency for near-term rate cuts, as policymakers continue to monitor inflation and employment trends. Key takeaway: caution, data dependence, and the potential for policy adjustments later in 2026 if conditions allow. 

Source: JP Morgan.

The peace dividend many of us were born into has expired.

We’re entering a new geopolitical reality—one where defense investment can no longer be ignored, even in the most ethically constrained portfolios. Whether you’re in a public pension, a family office, or a university endowment, the relevance of defense—both from a return and a risk management perspective—is rising fast. The question is no longer if you should think about defense exposure, but how you approach it.

Context: A New Strategic Normal

In my early days working at a pension fund, defense exposure was marginal—both in scale and scrutiny. But at Axxets today, that conversation is shifting.

The war in Ukraine, tensions in the South China Sea, and increasing cyber threats have created a multipolar environment with fragmented alliances and local conflicts. These aren’t isolated skirmishes—they represent a structural shift. Defense spending is no longer cyclical; it’s foundational.

This shift is being echoed across markets:

• Anduril in the U.S. is pushing forward dual-use defense tech that sits at the edge of AI and autonomy.
• Rheinmetall is playing a growing role as Europe seeks defense sovereignty.
• Turkey’s defense industry has become a powerhouse in drone and missile development.
• Even Nigeria is stepping up as ECOWAS’s security guarantor—something unthinkable a decade ago.

This isn’t just about legacy players like Lockheed or Raytheon anymore. The industry is evolving—and fast.

Insight #1: Defense as Strategic Infrastructure

One lesson we’ve learned is that defense is increasingly analogous to energy or cybersecurity—a non-optional sector underpinning state functionality. For many regions, it’s also an employment engine and a source of technology spillovers.

While traditional defense primes are still important, we’re seeing compelling innovation at the intersection of software, AI, and autonomy. These startups—and the venture capital flowing into them—are modernizing the defense sector with scalable, modular solutions that can support both military and civilian uses.

For allocators, this means the entry points are no longer limited to defense ETFs or legacy primes. Private capital is playing an increasingly important role in shaping the industry’s next chapter.

Insight #2: Valuations and Volatility Are Real

The reality is more nuanced than “defense is back.” High valuations—often pushing P/E ratios near 40x—aren’t uncommon. Much like in AI, investors must be selective and realistic about what’s already priced in.

Add to that policy risk and export restrictions, and you’ve got a highly reactive asset class. For example, a shift in U.S. foreign policy can cancel contracts overnight.

In practice, this means we focus on:

• Dual-use technologies with civilian applications.
• Localized players with government backing and cost advantages.
• Suppliers in NATO-adjacent markets adapting to new procurement frameworks.

Being thoughtful here isn’t just ethical—it’s also practical portfolio construction.

Insight #3: Ethics, Exposure, and the Investment Dilemma

At Axxets, we’ve had internal debates on how to incorporate defense. It’s a conversation that balances fiduciary responsibility with family values.

Defense investing isn’t binary.

It can include supply chain tech, cybersecurity, drone navigation, AI systems, and encrypted communication platforms—each sitting on a spectrum from commercial to military use.

That said, not investing in the sector is also a choice—with its own trade-offs. Ignoring the conversation entirely risks missing exposure to a sector reshaping global power dynamics and, by extension, markets.

Final Thought: Don’t Skip the Conversation

Defense is no longer a niche or optional allocation. Whether your conclusion is to invest or to consciously exclude it on ethical grounds, the conversation must be had.

Because in a world where geopolitics directly shapes returns, sitting on the sidelines is itself a decision—one that should be made thoughtfully, not passively.

What role does defense play in your portfolio today? Is it time to revisit that assumption?

Source: STATISTA

Week of January 12–16 

Key data on inflation, consumption, and growth shape the start of 2026 

This week, markets reacted to mixed signals: stable U.S. inflation, positive surprises in retail sales, and uneven growth across Europe. Meanwhile, China strengthened its global trade presence, and Argentina closed the year with its lowest inflation in eight years. 

United States 

Headline inflation held at 2.7% and core inflation at 2.6%. PPI rebounded to 3% due to energy. Retail sales rose 0.6%, pointing to a segmented consumption pattern. Projected GDP was revised to 5.1%. The earnings season begins with positive results from banks.

Europe 

Germany exits recession with 0.2% annual growth, though industrial activity remains weak. The United Kingdom surprised with 1.4% annual growth. Trade association BGA expects a modest recovery in Germany’s wholesale sector in 2026. 

Japan 

The prime minister will dissolve Parliament and call early elections. The Producer Price Index fell to 2.4% year over year in December, the lowest level since May, in line with expectations. 

China 

Posted a record trade surplus of $1.19 trillion in 2025. The decline in exports to the U.S. was offset by strong growth in shipments to Africa and Asia. 

Argentina 

Inflation closed the year at 31.5%, its lowest level since 2017. In December, prices rose 2.8%, driven by transportation, housing, and food. 

Brazil 

Retail sales increased 1.3% year over year in November. While positive, they remain below the historical average. 

Mexico 

The World Bank lowered its 2026 growth forecast to 1.3%. Fixed investment fell 5.5% year over year in October, although residential construction grew 13.5%. 

Key upcoming events 

• United States: markets will be closed for the Martin Luther King Jr. Holiday 01/19 
• United States: the final reading of Q3 GDP growth will be released on 01/22 

“The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett

Monitor

U.S. core inflation came in softer than expected in December, reinforcing the view that underlying price pressures are gradually easing. Core CPI rose just 0.2% month over month and 2.6% year over year, both below consensus, pointing to a continued normalization of inflation dynamics. Still, headline inflation remains at 2.7%, meaning price stability has not yet been fully restored.

What’s holding the Fed back is the composition of inflation. Housing costs, more than a third of CPI, continue to rise at an elevated pace, while services, recreation, and airfares remain sticky. Even as some goods show deflation, the Fed is still waiting for economic data and assessing the effects of previous cuts, limiting the case for near-term rate cuts. Markets now expect the Fed to remain on hold at least through the first half of the year.

Market Implications

• It reinforces the scenario of inflation slowing down, but too slowly to justify immediate interest rate cuts.
• Risks in the housing and services sectors reduce the likelihood of an accelerated monetary stimulus cycle.
• Makes upcoming inflation and labor data critical for market direction.

Source: CNBC with information from U.S. Bureau of Labor Statistics

U.S. forces captured Nicolás Maduro and his wife, Cilia Flores, in Caracas through an operation that included air strikes on military targets. President Trump stated that his administration will temporarily assume control of Venezuela’s governance. Venezuela’s Supreme Court subsequently appointed Delcy Rodríguez as interim president, leaving open the possibility that she could remain in power for an extended period.

Market Reaction: Limited Impact, Targeted Opportunities

Initial market reactions were concentrated in commodities. Gold prices rose amid heightened geopolitical uncertainty, while oil prices edged modestly lower. Despite holding the world’s largest proven oil reserves, Venezuela’s oil production remains depressed at approximately 900–950 thousand barrels per day. With political stability and renewed licensing, production could increase by roughly 250 thousand barrels per day in the near term, reaching 1.3–1.4 million barrels per day within two years. A more substantial recovery, however, would require investments exceeding USD 200 billion, according to JP Morgan estimates.

From the perspective of traditional financial markets, Venezuela has marginal relevance. Its sovereign debt has been in default since 2017, with total external liabilities estimated at USD 150–170 billion. Nominal GDP, estimated by the IMF at USD 82 billion for 2025, is likely closer to USD 60 billion at current exchange rates—less than half of its pre-crisis size.

Pragmatism Over Idealism: Understanding the Potential Transition Phases

What is unfolding is not a conventional democratic transition, but rather a geopolitical operation consistent with historical precedents. We view the transition as potentially unfolding across three phases:

Phase 1: Containment and Control (Current)

The immediate priority is to prevent institutional collapse and widespread violence. This explains Delcy Rodríguez’s role in ongoing negotiations: she represents administrative continuity across ministries, PDVSA, and the banking system; maintains channels with the armed forces and intelligence services; and retains the ability to execute orders on the ground. In acute crises, operational control often outweighs electoral legitimacy.

Why is María Corina Machado not at the table? She does not control weapons, territory, or logistical infrastructure. For the core Chavista power structure, she represents an existential threat. President Trump was explicit: “I think it would be very difficult for her to be the leader. She does not have internal support or respect within the country.” Secretary Rubio added that “the vast majority of the opposition is no longer present in Venezuela,” further limiting the scope for immediate elections.

Phase 2: Power Rebalancing

Once security stabilizes, civilians, technocrats, and new political figures are expected to enter the process. This phase would involve institutional rebuilding, restoration of basic services, and international normalization.

Phase 3: Democratic Legitimation (Uncertain Timeline)

With functional institutions and contained violence, free elections and broader economic normalization become feasible. This sequencing is consistent with successful transitions observed in the Southern Cone and Eastern Europe.

Path to Reconstruction: Oil and Normalization

Secretary Rubio stated that the oil “quarantine” remains in place, affecting approximately 400 thousand barrels per day of exports, based on public data. Logical next steps would include formal diplomatic recognition and an expansion of licenses, eventually paving the way for debt restructuring.

A fast-tracked bilateral agreement anchored in oil—potentially outside the IMF framework—could lead to a less orthodox restructuring than under the G20 Common Framework. Under our estimates, Republic and PDVSA bonds would likely be treated similarly, potentially incorporating a value recovery instrument (VRI) linked to oil production or prices.

Opportunities for Sophisticated Investors

Venezuelan bonds approximately doubled in price during 2025, and we are currently observing an additional 8–10 point rally this week. In an environment where single-B emerging market sovereigns are trading at five-year low yields (7.6%) and 18-year tight spreads (343 basis points), Venezuela offers a combination of relative value and a compelling normalization narrative.

Given the scale of Venezuela’s oil resources and the U.S. administration’s determination to extract economic returns from its intervention, market participants are likely to remain constructive. Technical analysis suggests value in bonds without collective action clauses and in instruments where accrued interest is less fully reflected in market prices. That said, it is important to emphasize that visibility on a comprehensive debt restructuring remains limited, and there is statute-of-limitations risk for bonds purchased after the publication of the Tolling Agreement in August 2023, which extended the prescription period for defaulted bonds from 2023 to 2028.

For investors with higher risk tolerance, we see emerging opportunities that we are actively evaluating:

Sovereign debt restructuring: Bonds with still-valid maturities and more recent issuance dates could see higher recovery values, particularly as a way to minimize exposure to unpaid accrued interest, which could face significant haircuts in a restructuring scenario.

*Bond secured by 50.1% of CITGO Holdings shares

Traditional Financial Markets

While a potential lifting of U.S. sanctions and renewed investment could support higher oil production, the process would be complex and span multiple years, given decades of underinvestment and infrastructure deterioration. Venezuela currently represents roughly 1% of global oil supply, amid persistent political, legal, and security risks, as well as the structural disadvantage of producing extra-heavy crude, which is less valuable than light crude and reduces its attractiveness to international investors. As a result, we do not currently view this exposure as particularly compelling.

Direct exposure to publicly listed companies outside the energy sector is generally limited relative to oil, given the historical dominance of the state across large parts of the economy (including telecommunications and banking), as well as sanctions and capital controls. In this context, any potential upside for non-energy companies would depend primarily on policy reforms, sanctions relief, and improved legal and financial certainty, rather than near-term operational improvements.

For further discussion or to receive our detailed analysis, please contact your investment advisor at Activest.

Source: Internal analysis Activest

Private debt, though a core component of institutional portfolios for several years, is currently experiencing strong growth. However, a challenging macroeconomic backdrop and multiple structural forces are reshaping the dynamics of private financing.

Aging populations and declining birth rates are reducing demographic growth, further increasing the cost of capital. At the same time, the energy transition, national defense, digital infrastructure, and other strategic priorities require trillions of dollars in annual investment, creating fierce competition for scarce capital.

Additionally, regulatory pressure, deglobalization, and macroeconomic volatility are increasing liquidity risk across certain segments of private debt. While the asset class remains attractive due to its ability to generate above-market returns, a more rigorous assessment of credit risk has become essential.

Key Data: 

• Aging populations increase the cost of capital 
• Energy transition and infrastructure demand trillions annually 
• Regulatory pressure and deglobalization heighten liquidity risk 
• The era of cheap capital is over 

Conditions have changed. Selectivity and credit quality are now more important than ever. Although private debt offers attractive returns, the current environment demands more rigorous analysis. A disciplined approach to credit quality and liquidity risk assessment enables capturing opportunities without compromising portfolio soundness.

Source: Activest/Axxets Internal Analysis