Andrew Hunt's outlook has turned notably more cautious since the previous conversation a few weeks earlier. The core thesis centres on a deterioration in global capital flows into the US, which he sees as the key vulnerability markets have been overlooking.

China as the critical driver. Chinese companies, squeezed by weak domestic cash flows and property-related debt repayment, are now repatriating export receipts and pulling back offshore assets. The Chinese private sector holds $4–5 trillion in overseas assets, much of it channeled through Cayman Islands and other offshore centres into US private credit and private equity. That flow has reversed. The PBOC has partially offset this through intervention ($100–150bn/month), but is directing funds into European debt and gilts rather than US assets.

US funding stress emerging. The US current account deficit is becoming harder to finance as Chinese, Japanese, and European investors all pull back from US risk assets simultaneously. This is showing up not in treasuries (where the Fed is buying $60bn/month) but in private credit and private equity markets — asset manager share prices collapsing, secondary funds launching to rescue other funds, and US corporates scrambling back to conventional bank lending at an extraordinary pace. Hunt draws a parallel to 2006, but with corporate private credit replacing consumer mortgage markets as the stress point.

Economic momentum fading. Strip out AI capex and the US economy looks weak, restaurant bookings slumping, air travel slowing, nowcasting models declining sharply. The AI boom itself is an "input boom not an output boom," and Hunt questions who ultimately buys the output if middle-income jobs are displaced.

Europe the surprise winner. PBOC flows plus European repatriation have given Europe a balance of payments surplus approaching three-quarters of a trillion dollars. Hunt is more positive on Europe than at any prior point, particularly southern European markets (Spain especially), likening the setup to a fixed exchange rate regime with a balance of payments surplus, which historically produces strong returns.

Key investment implications:

More supportive of sovereign fixed income globally, with the Fed still leaning into treasuries. Rotating away from US risk assets and AI-linked Asian markets (Taiwan, Korea). Favouring European equities, particularly southern Europe. Surprisingly constructive on Hong Kong, which is benefiting from mainland liquidity. Skeptical of further AI capex announcements, expecting more companies to walk back spending commitments.

On Australia specifically, Hunt sees it as an outlier. Population-driven inflation keeps the RBA hawkish relative to the rest of the world, making the AUD potentially a hard currency and attracting yield-seeking capital. Sydney CBD property could be vulnerable if global private credit weakens, but the broader economy is unlikely to slow as much as elsewhere.

The wildcard: Kevin Walsh's potential influence at the Fed could lead to the central bank buying private sector assets rather than treasuries — effectively the Fed lending directly to the real economy. Hunt flags this as a significant development to watch, with troubling longer-term implications for capital allocation and central bank credibility.