Jay Pelosky argues the U.S. is behaving like a ‘bad old emerging market’ while still trading at a premium, and that premium should fade over time. He is bullish non-U.S. markets, especially Europe, China, and emerging markets, and he thinks the right portfolio response is to stay underweight developed-market bonds and overweight equities and commodities.
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Jay Pelosky’s core thesis is that the market is entering a long period of global leadership rotation away from the U.S. and toward the rest of the world, with the clearest beneficiaries being Europe, China, emerging markets, commodities, and selected “thematic” growth areas like AI, robotics, defense, and clean energy. He frames this as a tripolar world—Europe, Asia, and the Americas—driven by an unprecedented spending super cycle rather than a single-country cycle. In his view, the U.S. still trades at a large premium in valuation and asset prices even though its policy behavior increasingly resembles a weaker emerging market; over time, that U.S. premium should compress. He repeatedly ties this view to spending and earnings. …
Near term, the tape still looks supportive for risk assets as long as earnings stay strong and Iran headlines remain manageable; tactically, he would rather be long equities/commodities than chase bonds. The immediate risk is a sudden rates shock or growth scare that forces a fast de-risking.
Over the next several months, his base case is continued rotation toward Europe, China, EMs, and commodities as earnings revisions improve and the market keeps rewarding the spending super cycle. Confirmation would come from resilient earnings, firmer non-U.S. growth, and more obvious pressure on U.S. relative valuations.
Structurally, he sees the market moving into a tripolar regime where regional integration, not U.S.-centric globalization, drives returns. In that world, the U.S. premium compresses, bonds stay unattractive, and the durable winners are tied to physical inputs, defense, clean energy, and selected AI-adjacent industrials.
The U.S. is acting like a bad emerging market while still trading at a large valuation premium that will fade over the next several years.
His thesis is that policy volatility and institutional behavior resemble EM, but pricing still reflects U.S. exceptionalism.
The Iran shock is already largely priced in by markets.
He says markets digest narratives quickly and expect a deal, limiting downside from the conflict.
A global spending super cycle in AI, climate, and defense is driving an unprecedented rise in spending and supporting earnings.
He repeatedly cites spending by all three major regions as the engine of the cycle.
Is the secular bull market in bonds over?
Has oil prices decoupled from their inverse relationship with stocks?
Jay explains that markets are 'omnivorous' — they digest narratives and move on. The Iran conflict is already priced in because a deal is expected. He argues the global economy is far less sensitive to oil than 20-30 years ago, and a massive global spending super cycle ($10T now to $16T by 2030) on AI, climate, and defense is providing underlying earnings support that decouples stocks from oil shocks.
What have been the biggest tectonic shifts in themes over your three decades on Wall Street, and what is the major theme now?
Jay outlines a sequence: emerging markets in the early '90s, tech in the late '90s/early 2000s, financialization mid-2000s leading to the GFC which blew up globalization, then 2010-2020 recovery, then COVID. Now we're in 'thematics 2.0' — driven by a tripolar world spending super cycle, US-China 'constructive strategic stability,' and themes like AI, robotics, automation, and autonomous defense. Earnings growth is so strong that tech stocks are actually cheaper on a forward basis than they were years ago.
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