How I Called 2026's Biggest Rally | Vincent Delaurd

So yes, three bubbles, stock market bubble, I think it's undeniable, a pessimism bubble and finally a nominal growth bubble. These are conditions that we observed before every major revolution in history. Rapid technological change, acceleration of nominal growth and at the same time a sense that things are unraveling.

I mean the current conditions kind of remind me of late 1999, early 2000. So we could have this kind of inflationary acceleration, which makes me quite bullish for now on stocks.

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All right, everybody. Welcome back to another episode of Forward Guidance. And joining me this week is a repeat guest Vincent Delaware, director of global macro at StoneX. Vincent, it's been about 10 months since our last conversation. Good to have you back on.

Yeah, not much has happened. So, you know, I'm sure it's be a brief episode here.

Yeah, nothing to talk about. No craziness to say the least.

Yeah, the complete opposite. What a 10 months. Crazy crazy times.

Yeah, let's start off things. I would love to hear a bit about how you're thinking about 2026 because I think you have some out of consensus views especially in light of you know if we rewind to late fall you know October November the government shutdown was happening we were seeing some pretty sketchy headlines and numbers coming out of the labor market and seemed like a lot of people were talking a bit about either near recession or at least at the very least a growth slowdown and you you came out with some work back then talking a bit about how one of your your highest conviction trades was around the energy complex and I think that can we we'll get into that in a minute. But I think one of the big themes that's associated with that is you have this framing of a an initial growth free acceleration in early 2026 that could end up becoming a second big inflationary wave. So yeah, just walk us through the thesis of of how you're thinking about 2026.

Yeah, I was only partially joking when I said not much has changed since 10 months ago. I mean, I feel like every episode I go to, I'm still fighting the same windmills, you know, like Doniote and the the Santes movie. So, the windmills are are these imaginary sessions that seem to come back like like reruns of the Scream movie.

And every time I tend to be skeptical on it. I generally maintain my kind of great reset idea that we have this higher growth, higher rate, higher productivity, higher inflation, higher deficits, and that until proven otherwise these kind of growth scares are to be faded.

The main way I check that is not with official data. I'm convinced that we have we've always had structural issues with the establishment survey or the household survey. Now we not even able to get the data or if we do get the data and the data doesn't please the supreme leader the data collectors get fired.

So I think it's quite important to look at things that actually tell the reality which is tax collections and that's that's one of the reason for my calls that we would not have a recession in 2022 in 2023 in 2024 2005 and now 2026 because I could see tax collections where generally increasing between 5 and 10%.

For last year we were at about 8%. Now you can argue that there are some distributional issue, there may be some inflation, there may be some bracket creep yada yada, but you know it's still extremely strong nominal growth.

So I go into 20 into 2026 with the same outlook with maybe one added worry is that this growth story might even get too hot. I don't think people realize how quickly the US economy is growing in nominal terms.

I'm not necessarily buying the view that we had this amazing productivity boom. I mean all I can see now is nominal incomes are growing very rapidly. Tax collections so far this year are up by more than 10% on personal income and starting now we're going to get massive refund checks.

So the one big beautiful bill is retroactive. So people overpay the taxes in 2025. So in the next four weeks, we're going to get about $200 billion dollars in tax refund checks that are going to hit. And then most academic studies show that it's it's kind of like you win the lottery, right? When you have windfall gain, you just spend it right away.

So that's the first part of the stimulus. And then after that I'm yeah I'm a believer that we have a very difficult political equation for the administration. We have a lot of things coming up lately that make not just the administration but a lot of people look pretty bad.

And we badly need something to distract. So that something could be a war which is quite expensive. But I would also think that something would be checks. I mean obviously that's the simplest solution to the 40 crisis is you know we're not going to fix the healthcare system. We're not going to get government spending. Send people checks is the easiest way.

And again because of that boom in tax collection there's a lot more fiscal boom than people believe there is. I mean it's not for fiscal virtue. Obviously spending is very high but because tax collections are so strong and tar about $300 billion a month and nominal GDP is exploding we actually have fiscal room for significant stimulus in 2026.

That's a that's a great overview and yeah the the geopolitical and political gains leading into the midterms we'll get into in the second half of the the conversation. But I do want to you mentioned there about tax collections and I really want to just emphasize that unpack that further because you wrote that actually tax collections which is directly data from the daily treasury statement that the Treasury publishes is up 24% in January year-over-year. And I would just love for you to to really explain to the audience why this is the indicator that you believe so strongly in.

Because I think people that will listen to these macro podcasts and start to try to analyze the data themselves, they will quickly get overwhelmed by looking at, okay, ISMs are saying this thing and then the seasonally adjusted labor data saying this thing and then the nonseasonly adjusted data saying this other thing and they just get very whips around and confused and it doesn't help that now we don't even get the data sometimes in general. So I'm just curious like could you really emphasize and explain why tax collections as a metric is is is so powerful with that context.

I mean on on a personal level I I was meant to work for the French Ministry of Finance and I that's that's where my fascination with taxes came because that's that's what the French Ministry of Finance does is heavily taxes population. That's your job. uh and I always thought like okay if you you know t tax collection are the most natural measure of economic activity I mean especially that withheld in employment income tax I mean for those who are not Americans so when I get paid from from SOX every two weeks there's about 25% of my paycheck that doesn't even go to my bank account and go straight from from SonX to the to the treasury and that's to pay basically my my taxes and then when I put 15 income come we kind of adjust but that number assuming there's no change in in in the tax code is an excellent proxy for how much income there is in the economy and it's reported daily of course you have all sorts of quirks right people get paid around the first and the 15 there Monday sex and things like that so you kind of need to be careful with the the date range when you look at this data and that's why that that 20% figure in January. I mean, it's probably excessive. I mean, now that I have more data, it's more around like 12 13%, but it's still remarkable.

So that's one bucket. And when I think about it, I think about that with our data as a proxy for the call that the formal economy people who have a job at a big corporation with, you know, benefits and 41k and so forth. And that's going fine. I mean, actually very rapidly.

Now the part that's even more interesting is this non-withheld individual individual income category which is around 1.2 trillion a year in taxes and that's basically two buckets. One is capital gains and of course because we have an everything bubble. We have massive capital gains and every year more and more and that's part of the story for 2026 by the way people will pay the capital gains in the rear. So the the treasury will get that lot of money that in my opinion could fund more spending.

And then the other part is around 1 trillion from that 1.2 trillion bucket and that's all income that you does not come from capital gains or your primary job. And that's what I see as a proxy for the gig economy. And that's really to me it's it's the greatest story never told of American capitalism pretty much since the invention of the iPhone in 2007.

And then you had all the development of the apps, the you know the the Uber, the Door Dash, the the YouTube, the only fans, the Instagram. That started to grow very rapidly. Then you had COVID when people work from home and suddenly realize you know if you work at the I don't know the marketing department of a large firm like yeah you probably have couple hours a day that you could dedicate to something else than your primary job.

So you have the technology you have the incentive you have the cost of living shock. So that really took off since 2020 and now we're looking at close to a trillion dollar in tax collection from that category. Now assume a 20% tax rate. That means that the underlying tax base is around $5 trillion and that's growing by 10% a year. So that's basically twice the economy of Brazil growing at China like rates of growth.

And I think that's the category that all these official statistics you know if you I mean what's the PMI? You know you you send like 50 people like how do you feel today? You know what they'll tell you? How do they feel sentiment based on the stock price? Okay. and you try to predict the stock price of the stock price basically or you know when when you do the the household survey you know you try to reach people on the phone no one picks up the phone these days and you ask them is somebody in your household working what's work what's not all these things have become blurry.

So that's why and also there is the the issue that I think we're going to talk later about this weird kind of pessimism bubble this vibe session where people are actually doing good but for whole different set of reasons their reported happiness or their reported sentiment is is much lower all these issues are taken care of with tax collections right I mean no one happily pays taxes has to be read income it's cash it's in real time you just have to be aware of quirks in the data and changes in tax rates but once you do that I think you have a fantastic barometer of of the economy and again this is something that you know it kind of brings me back to this idea that the US kind of moving back towards a kind of emerging market. Like if you if you went to like a a less advanced economy, that's what you would use as an economist. And I think kind of makes sense given everything that's happening in the US to think of the US as as a large emerging market.

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Yeah. Yeah, that makes sense. I'm a I'm a big fan of that metric as well. It's it's Yeah, it's it's as hard data as it gets really. You know, just money in, money out.

Okay. So, so based on what it's saying, it's seems like the economy is doing a lot better than what a lot of pessimists are are are saying. And I'm curious about yeah, how you're thinking about the other growth levers that could lead to this second wave. I imagine one of them as you've hinted at so far is the fiscal impulse and and we could start there and I'm just curious about it. It seems like most analysts when they look at the impact from the big beautiful bill you can see most of the tailwinds are coming in the first half of 2026 and their opinion is that most of that is already baked in and well known. It'll just lead to you know some tax refunds and that sort of thing. Do you see some of the the fiscal impulse coming from that or do you believe that there's going to be an additional fiscal stimulus coming on top of that for 2026 in the leadup to the midterms and that's part of their player?

Yeah, both. Yeah, I think most banks have come up with with with estimates for the tax refunds that are close to what I had six months ago. About, you know, $200 billion in additional tax refunds. I mean it's huge. I mean it it's going to hit in couple weeks. So even though we know about it, you know, it's like you know, you know, a train is going to hit. I mean, it still hurts.

So I I think there will be some some immediate and you'll see that in in services in you know people eat at the restaurant, take the vacation. So that's the first it and then yes I I expect more fiscal in the second half of the year.

The tariff checks are kind of held up with the Supreme Court. My understanding is that it may not come until until late March that that verdict. But as soon as that's clear and my expectation is that and the more time passes the harder this this becomes this is to unwind and in general like I I don't think the Supreme Court it would be wise for them to die in the battle of terrorists. I mean there are so many constitutional battles to pick. So I think they'll be you know they'll probably like do a little something but but by and large the the tariff money will be there and the political incentive to spend it will be very very large.

I mean the closer we get to the midterm the the larger the risk really of impeachment maybe criminal prosecution against both Trump and his family. So you really want to get avoid that outcome and then we see plenty of these attempts.

So it could be yeah it could be tariff dividend checks. We hear I so I forced myself to listen to pretty much every interview that Kevin Wars has given.

I was about to bring that up the relevance of that at all to you. Yeah. In the past. Now that you know that I mean he he's first of all he's very smart he's very charismatic very good speaker and then he once in a while it's like Easter egg in video games like he'll drop something and like Qy for the people like what do you mean Fed Treasury Accord main like who knows there may be something that we're not thinking of but my general idea is that yes fiscal will have to be run extremely loose loose.

The economy is already growing very fast. The Fed is going to cut to the extent that there is such thing as a neutral rate. I think it's higher than the current level of the Fed fund rate. So we are stimulating we have banking deregulation especially if we shrink the Fed balance sheet. We certainly need to put these treasuries somewhere else. So we'll have to basically bribe the banks into taking them. And the way you bribe banks is by allowing to take up more leverage.

So we could have this kind of inflationary acceleration, which makes me quite bullish for now on stocks. Although I I think we are seeing signs that the market is turnurning that volatility is picking up and that you know I mean the current conditions kind of remind me of late 1999 early 2000 when we're still momentum was slowing but you were still making new highs. the leadership was shifting on the surface and then volatility was really rising with entire segments of the market blowing up.

And that would fit nicely into this pattern where we see the market kind of grind higher on higher volatility until the summer. And then by the summer we get we get the stimulus, we get the rate cuts. not that we get great earnings obviously because earnings will benefit from inflationary reborn but there won't be that much new fuel to power the advance and then we have to start considering the I think the high chance if if the election is held in under fair conditions that the Democrats win a landslide and then we have divided government and then we get that kind of shift towards populism on the left that would pave the way for what expect to be a secular bare market in the late 2020s, early 2030s.

Okay, lots to unpack from that. I want to I want to get your perspective on on that wash point in this new framework for for the Fed monetary policy because you've been a you've been a pretty stern critic of the relevance of monetary policy out there last year. Like I think our our last interview was the day after the Fed meeting or something. I was just like, "What do you think of the Fed meeting?" Like, "I don't know. I skipped it." this is like it has it's been mostly just you know semantics and and you know the whole press conference thing and I'm just curious like is that is that perspective changing as Worsh comes in and brings in these new ideas because if you're talking about in inflationary impact from monetary policy I imagine that's slightly different from where we've been over the last decade or so.

Well, part of my skepticism over Fed meetings and and dot plots and and forward guidance comes from Kevin Walsh. I mean, he he is these amazing interviews, you know, where he just rips the Fed apart and he's good at it. I I recommend people I think it's the Uber Institute like listen to Kevin W because he's also funny and he he speaks well, he writes well, his opads are pretty good and and and he hits it on the head.

Ultimately I you know I I'm skeptical that I I think institutions frame leaders rather than leaders frame institution and I think that's a pattern we see in this administration is is you know you get Cash Patel to lead the FBI right so you get the the Epstein 5 guy to cover up the Epstein fives you get Tel healthy gabbard at intelligence and then you you you you organize a coup in Syria and you bomb Iran. And I could keep you, you know, RFK for health and human services without so it's it's a pattern of this administration to put people to do the exact opposite of what they said they were going to do before getting the job.

It's it's, you know, kind of makes for great TV as as you would say on The Apprentice. And I think Kevin Walsh is is a he's a smart man. Obviously, he's a political agent. He's very creative with arguments and he's basically found a a breach, right? So, he had for what 15 years now, he had this demonstrabably false model of balance sheet policy. he keeps, you know, he was part of this, oh, Q is going to be inflationary, you know, there was this oped in in the 2010s with very smart people on it, saying that, you know, burn Bernoni was going to, you know, like ruin the dollar and that was just not true. I mean, we have like two decades of Huey in Europe, in the US and and Japan that shows that it's not inflationary.

But what he figured out now is that he can change that. You say, well, if the Fed balance sheet, growing the Fed's balance sheet is deflationary, then shrinking it must be deflationary, and if I shrink the balance sheet, which we could argue for moral reason is probably a good idea, then that gives me room to give rate cuts. So, he kind of twisted his argument into something that would appeal to the new administration. That and the fact that he looks good on TV got him the job.

So I don't think he's going to be as hawkish as the market thinks. Again another example of someone who does the exact opposite of what he says as soon as the point is Scott Bessant. Scott Besson was a ferocious critic of Yellen for Yelenomics Yanomics activist treasury issuance shifting to the format. What does he do as soon as he gets in? So I that's why I'm I'm not convinced that Kevin Walsh is going to be the Hawk that he's rumored to be. I also think the window for rate cuts is quite low quite short. It may be passing as we speak.

Now we still have this kind of tailwind from from the lagging rants in the mar that means that CPI is going to be you know hopefully somewhat contained but the more time passes u the harder it will be to maintain the lie and you can see the like crack like people know that inflation is not 2.5% or whatever it's going to be at the next release. So, you really have to do it now before the the lie becomes too obvious.

So, I I think we'll get the cuts. And I think eventually yeah, I mean, it would be crazy for Worsh to not not have had the rates conversation with Donald Trump before he was appointed. I mean, that was that's the condition to get the job is you will cut rates.

I think the thing is and this ties back to what I was getting at that you're going to weave a thread here in terms of what we've been talking about but okay you think you know growth re acceleration in 2026 we talked about the fiscal part and then I feel like that the other big component to discuss here and it leads into where I want to go with this which is around AI AI capex and and productivity boom so you know what's underwriting I think the war's thesis there for more rate cuts is that we're going to see a huge productivity boom and therefore we need to cut rates a bunch and also for hawkish on the balance sheet like those two together we got to get rates way down.

So there's there's that dynamic that I'd love to hear your perspective on and then also just the impact of all that AI capex on the economy. I mean we're seeing over the last week we had the max 7 earnings come out and each of them their estimates for capex are like blowing through the roof of of like topline estimates. I mean we're we're we're getting close to a trillion dollars in capex just from them in 2026 and that's going to have a pretty positive impact on the economy. Yeah, how do you think about those two components of of the AI play?

Yes. So let me first answer on Walsh and then on the economic impact of the capex boom. On WASH yeah that's basically talking point from the Trump administration. asset you know would be on CNBC all the time making that same point. And again I think WSH has kind of you know jumped on the bandwagon there. the growth story or this is um you know kind of a green span fed right where green span saw the supposedly saw the potential of the internet boom and ke price lower and allowed for great moderation in 1990s I think there's a lot of issues narrative I think a lot of the great dis from 1990s had to do with China had to do with high immigration things that are globalization things that we're not having today it was not just you know people buying stuff you know chatting on AOL chat rooms and and and and and buying stuff on eBay.

But so I I'm somewhat skeptical both of the the narrative and and and its inclusion. I mean for all his professional life, Kevin Walsh has defended a monetarist view of of inflation, right? The famous always and every monetary phenomenon. So if if you buy by this theory, things like productivity or government deficits or shouldn't matter. So again we see the same kind of comedy on nature where he grabs something that because it's politically expedient for him to use that.

I mean the bottom line is we don't know the effect of of AI on on on productivity. That's why I go back to this tax collection and this idea that all we know is income. Income is growing. Now is it inflation? Is it growth? Is it productivity? I I don't know what's what's our productivity right now. I mean, we could argue that it's very high, right? I mean, 10 years ago, we couldn't do these podcasts and but we could argue also that you know, are we is the US economy really that much richer because of our conversation like how do you measure productivity? I'm I'm very skeptical of this. Again, all we can see at any given time is income and what I know is nominal incomes are are growing. That's why I I keep talking about this nominal growth boom.

I'm open to the possibility that there is indeed a productivity component. I mean of course I like everybody I use AI and I'm amazed by some of the things that it does. I'm also worried about many of the things that it does. I think with technology it's always about adoption more so than the technology itself and we don't know what effects it's going to have. So I would leave that in the to be seen time will tell type of category.

Now your second question was the impact of the capex boom and there we we know right we don't know what the AI return will be in 15 years and whether the projection that these people make in terms of like GPU lifespan and how quickly they can monetize. But we know that you know when you build I mean some of these data centers are bigger than Manhattan. So you're just going to have to, you know, dig holes in the ground, take beams of steel. And that was part of my case for for energy. Even old school energy like not just that gas. I mean, the the ideas of data centers will be powered eventually by by renewable and and and nuclear and then that gas is going to be the kind of the bridge energy out of even oil because the the actual process of building these fields and again these things are massive. they're not regular industrial structure where it's it's basically just an empty shed, right? You have these rows of servers, much more cooling, much much higher wallto-floor ratio. So that they're more energy intensive to build them.

So yeah, obviously that contributes to the inflationary boom of 2026. I mean if we think about the the main sectors of of of the economy you have your your domest your government sector where I expect we already have five six% deficit to GDP and I expect more impulses we get the checkbook policy out then the private sector is increasing the balance sheet that's what you do when you when you invest you you grow the balance sheet and your your household sector savings are exoringly low So all these to me point to a an economy that's accelerating and possibly overheating.

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Very well put. So, okay, this gets to this other interesting framework that you have, which is that that's all leading to a a nominal growth bubble, but then you also believe that there's multiple bubbles happening. There's a also a stock market bubble and then also a pessimism bubble. Walk me through how all of those work together.

I think a lot of the qualities of of being a a good macro analyst comes from being able to hold two contract two contract contradictory thoughts in your head at the same time and not be overwhelmed by the cognitive dissonance that comes from it. And it's very uncomfortable, right? Because the mind likes structure and coher narrative. In reality, the world is complex and and every action creates a reaction. So, you can always prune to something that's moving in the wrong direction and this and that. So, that's where I'm going.

So, I talked about this kind of nominal growth bubble. At the same time, we have a pessimism bubble. If you look at at sentiment surveys, I mean, we are at levels not seen since last COVID. If you ask people about the direction of the country or if you ask young young people about how they feel about the future if you ask people who want to buy a home I mean not in recent time we've never seen such pessimism well arguably you know this is the best of time I mean it's almost kind of reminds me of the the deacons quote in the tale of two cities you know it was a time of light a time of darkness it was a season of hope it was a season of despair and interestingly what he's doing there he's describing describing revolutionary France and and I think there's a nice parallel there when we are about to experience revolutionary change and I believe we are we have this kind of technological revolution and we see the institutions crumble around us you see both the light and the darkness at the same time and and that's I think the cognitive den that generated contributes to this nervousness that that we can feel in energy so yes three bubbles stock market bubble I think it's undeniable that at least part of stock markets are in bubble. The kind of volatility that we see the valuations that we see are extremely high. A pessimism bubble and finally a nominal growth growth bubble. Again these are conditions that we observed before every major revolution in history. Rapid technological change, acceleration of nominal growth and at the same time a sense that things are unraveling and that contributes to this sense that you know the world is going to burn.

I love that framing and it's it's interesting because you know when you look at those those consumer sentiment surveys like it's so it's so political these days you can see that you know during the Biden administration it was the Republicans whose you know consumer sentiment was in the dumps and Democrats are happy and now these days it's the complete opposite Republican sentiment is up here medium it's just like we have a lower baseline and that that's that that's part of My thesis what you say is true. You could also look at it in terms of you know people who own assets versus people who don't. K-shaped like sure like wealthy folks are doing better than than than poor people. The old are doing better than the young. The Republicans are more optimistic than than the Democrats but all of them are trading trading down. Like the Republicans confidence has never matched. Like I mean Trump won, you know, was looking back there was kind of a gold economy golden age on to some level like that his his like his personal approval rating was never very high around for because because of who he is. But his the confidence in his ability to manage the economy was very strong throughout the term. We are now seeing that this time even with Republicans and of course independence is kind of falling with with all the Epstein revelations. So it's again shades of gray but I think this this pattern of falling confidence is is observed across the the rich, the poor, the Republicans, the Democrats, the young and the old just at varying speeds.

How do you how do you think this all resolves itself? Like does it just keep getting worse until it gets so bad that it just has to improve or like do you adopt some of the framings that say Ray Dallio has where he talks about you know there's a few ways out of this it's either a deleveraging it's uh you know going to grab all the money from the rich people and wealth distribution or maybe we get a beautiful deleveraging like yeah how do you think about how this all ends up yeah generally I subscribe to the fourth turning death cycle radal Neil how analysis I would rebound on on the idea of the the beautiful data reging which which I think is a bit of a not a misnomer because if you read radalio he actually mentions all the elements Wall Street love the idea of the the beautiful data region because it's kind of the free it's the free lunch right it's like oh all we have to do is basically run G nominal growth hot and then suppress or the cost of capital with financial repression. So you know the idea is we you know let me walk back a little bit on this debt cycle as is you know as as you have peace and prosperity the economies expand, rich people get richer, poor people get somewhat poorer and you reach kind of a breaking point, right? Because at the end of the day the the rich people make money from the poor people and the poor people are too poor. That's very simp simplified Marxist Marxism 101 for you but that's that's the general idea. So you need somehow to kind of rebalance write down the value of the debt