Ep. 360: Dirk Willer on Trading Global Macro Regimes, the End of QE, and Navigating Equity Bubbles

Dirk Willer, global head of macro and asset allocation at Citi Research, has written a dense new book on global macro trading. In this conversation, he argues that many of the heuristics traders internalized during the QE era no longer apply, and that the key to navigating today’s markets is a disciplined regime framework that distinguishes between inflationary and deflationary shocks. The discussion covers how to choose the right asset class for a macro view, why valuation is a poor short-term signal, how to think about the dollar and geopolitics, and what a genuine equity bubble looks like.

Unlearning the QE Playbook

Willer’s central warning is that the post-2008 environment created a reflexive bias: every shock was treated as deflationary, which made QE the appropriate response. That reflex is dangerous now. “Right now the market is obviously more and more worried about inflationary shocks,” he says, and the same oil price spike that would have been read as a growth shock during QE is now treated by central banks as an inflation shock. Traders need to stay open-minded about which type of shock they are facing, because the market’s reaction function has shifted.

Choosing the Right Asset Class for a Macro View