Episode summary
He Modeled Every Regime Since 1965 | Aahan Menon on What Wins from Here
Excess Returns
· · 58 min · Hosts: Jack Forehand · Guests: Aahan Menon
Summary
Aahan Menon argues that this is a poor environment for big macro bets because the regime picture is unusually unsettled. Geopolitical shocks, especially around Iran and oil, are disrupting trends in growth, inflation, and policy before they can persist long enough to support a clean directional macro trade. His framework therefore points to humility, diversification, and a lower-conviction stance rather than a concentrated bet on reflation, disinflation, or recession.
His daily GDP nowcast, he says, continues to show stable nominal growth even as markets swing around. He pushes back on the idea that AI capex is driving the whole economy, arguing that tech is only a small share of headline GDP and that US consumption still does the heavy lifting. He also says dissaving has become increasingly important for corporate profits, with equity wealth and lower savings rates helping support spending and earnings.
On inflation and policy, Menon says oil is the key volatility source, but the deeper issue is that demand-driven inflation remains sticky even after supply shocks fade. He thinks the business cycle looks more resilient than classic recession indicators suggest because the economy is now more services- and technology-heavy. That leaves the Fed roughly neutral to slightly hawkish, with a meaningful risk that rising oil pushes policy back toward hikes.
Key takeaways
- Aahan Menon says macro conditions are too noisy for large directional bets because oil, policy, and asset prices keep interrupting trends before they mature.
- His GDP nowcast shows stable nominal growth, and he argues AI capex is contributing only a small slice of headline GDP.
- Menon says household dissaving and the equity wealth effect have become major supports for corporate profits and consumer spending.
- He says inflation remains above target even after stripping out supply shocks, because demand-driven inflation is more persistent than supply-driven inflation.
- Menon sees the Fed as roughly neutral to slightly hawkish, with oil prices the main variable that could force a renewed hiking bias.
Notable quotes
“what I love about what you do is is you are thinking about macro in a systematic way”
“there is no very clear forward macro regime outcome based on auto regime probabilities”
“nominal GDP is just super super steady despite all the macroeconomic volatility we're experiencing in asset prices”
“at the end of the day the the economy is mostly just consumption and that consumption is on a really really wide basket and AI is a very small part of that basket”
“the consumer has become the dominant driver of corporate profits in America”
How the episode opens
Welcome to Excess Returns. I'm Jack Forehand and I'm joined today by I think the most feared person in in the world of uh systematic macro uh due to some of the boxing videos I've been seeing uh up on Twitter. Our good friend Han Man.
Hey Jack, great to be on. Thanks for the grand introduction. — Yeah, I mean I have to keep my questions nice and easy here just in case I don't want to anger you based on some of those boxing videos I see you putting up on Twitter so we don't have to take it anywhere else.
That's true. Yeah, it's pro probably probably probably like that that's not the type of stuff you want to translate into the macro world. So,
So uh you have a great deck for us today and we're going to work through all all as many of the slides as we can. Obviously, you have like 94 slides. I think we won't get through all of them, but what we want to do is we want to talk about what I love about what you do is is you are thinking about macro in a systematic way.
And I've been a systematic investor my whole career and I think that's that's a really interesting way to look at this tighter thing. And so, we're going to work from the top down. We're going to start at the high end of the economy.
We're going to work down and and we're going to talk about some of the things you're seeing um in in the unique data you run. And uh I want to start with like one of the things it's not on the slide right now. One of the things you had in the title of this is not a good time to make macro bets um was one of the titles at the beginning of this presentation.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- systematic macro outlook
- nominal gdp stability
- fed policy and rates
- ai capital spending
- oil prices and inflation volatility
Companies and tickers mentioned
- Prometheus Research
Watch the episode
Watch “He Modeled Every Regime Since 1965 | Aahan Menon on What Wins from Here” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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