MW This hedge-fund manager has made about 50% in each of the last two years. Here's his home run trade.

By Jamie Chisholm

Rob Citrone thinks the U.S. will keep its exceptionalism and the economy will boom in 2026

Investors feeling queasy after the market's wild fluctuations of late may be reassured that even storied traders recognize it's been getting wilder out there.

"I actually think that markets in the last 5 or 10 years are getting less efficient," says Rob Citrone, founder of hedge fund Discovery Capital Management. "They just don't discount things ahead of time as much as they used to in the past."

The billionaire investor, who has worked with trading titans George Soros and Julian Robertson, says there's more retail and what he terms "machine" money in the markets these days, and they don't anticipate as much. Instead they react more to headlines, which means the market endures sharper moves.

Citrone was speaking in an interview on the Goldman Sachs Exchanges podcast, conducted by the bank's global head of hedge fund coverage Tony Pasquariello, and released on Thursday.

He describes his basic trading philosophy as a "top down, bottom up approach" where you can look at macroeconomic conditions, but at the same time examine what's driving individual assets. Not many people do that very well, he says. But he's been doing it for 26 years at Discovery.

And it's come up trumps in particular since the start of 2023, with his fund seeing gains of roughly 50% in each of the last two years. Discovery now has about $3 billion under management.

A significant part of those gains came from being short two of the three regional banks that went bust following the 2023 crisis, he says. However, he acknowledges that going short is "a lost art and not many funds are doing it anymore," after they were burned amid the meme-stock frenzy.

Citrone says he is still a believer in U.S. exceptionalism as the country enjoys a private sector at the technological vanguard, but valuations reflect that "a lot." Still, he's optimistic about the U.S. economy, believing tariffs, which aside from China he thinks may end up at no more than 10%, will not prove to be a significant drag. He expects the U.S. "will boom" in 2026 on the back of tax cuts.

Anticipation of that, and sticky inflation, should help push the 10-year Treasury yield over 5% by sometime toward the end of this year, he adds, making Fed rate cuts unlikely - though he didn't specify the time frame.

For now, Citrone believes "markets are offering a lot of opportunities, both on the long and the short side." He casts his net across the world, with a particular focus on emerging markets, and thinks some of the best opportunities are in Latin America.

"You have very cheap assets down there and you can make very large returns not just in equities." He also likes the region's fixed income, credit and some currencies, supported by what he called a political revolution that is moving to the right and embracing market economies.

He went so far as to call Latin America "a little bit of a safe haven" with regard to U.S. trade policies because no country in the region got more than a 10% tariff, so he sees a "lot of positive things happening there that can shield you if the U.S. doesn't do so well."

Part of the reason for good opportunities in Latin America is that investors have tended not to pay much attention to it, with many focusing on Asia for their emerging market exposure, he says. But China is "going to be a very difficult next ten years and I think that Latin America's going to boom.

His latest big bet is Argentina, where the election of Javier Milei introduced a more market-based approach, the removal of capital controls and a desire to tackle government spending. The MERVAL equity index in Buenos Aires AR:SPMERVAL is up about 150% since the populist took office in December 2023, and Citrone says his purchase of undervalued local peso-denominated credit assets is "a home run trade."

Indeed, he reckons the last time he nailed such a good trade was when he made over a billion dollars by going long the dollar versus the Japanese yen in 2013.

One way for U.S. investors to access Latin American equities is via the iShares Latin America 40 ETF ILF and for Argentina specifically there's the Global X MSCI Argentina ETF ARGT.

Markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are higher as benchmark Treasury yields BX:TMUBMUSD10Y dip. The dollar index DXY is lower, while oil prices (CL.1) rise and gold (GC00) is trading around $3,330 an ounce.

   Key asset performance                                                Last       5d      1m      YTD      1y 
   S&P 500                                                              5842.01    -1.27%  6.51%   -0.67%   10.90% 
   Nasdaq Composite                                                     18,925.73  -0.98%  10.25%  -1.99%   13.08% 
   10-year Treasury                                                     4.52       3.60    28.00   -5.60    5.00 
   Gold                                                                 3328       3.83%   -0.07%  26.09%   42.51% 
   Oil                                                                  60.95      -1.58%  -3.53%  -15.19%  -21.66% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

U.S. economic data on Friday include new home sales for April, released at 10 a.m. Eastern.

Shares of Deckers Outdoor $(DECK)$ are plunging 17% after the footwear company gave lower than expected guidance for the current quarter as growth in its Hoka brand slows.

Intuit stock $(INTU)$ is up 8% after the tax-preparation and financial-technology platform raised its full-year outlook.

The U.S. Supreme Court has cleared the way for President Trump to fire independent agency leaders - but probably not at the Federal Reserve.

A reminder that markets are closed on Monday for Memorial Day, and indeed the bond market will also shut early at 2 p.m. on Friday.

Best of the web

The Trump family's moneymaking machine.

Big banks explore venturing into crypto world together with joint stablecoin.

How young traders are getting rich betting on things like Rotten Tomatoes scores and the pope.

The chart

Bonds have been getting hit, while stocks are not shy from record highs. That means, as Callum Thomas, founder of Topdown Charts says, charts like the one below "are probably about as unpopular as it gets at the moment." He adds: "My indicators are saying stocks are expensive and bonds are cheap."

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   GME     GameStop 
   TSLA    Tesla 
   NVDA    Nvidia 
   MLGO    MicroAlgo 
   QBTS    D-Wave Quantum 
   PLTR    Palantir Technologies 
   AMC     AMC Entertainment 
   WOLF    Wolfspeed 
   AAPL    Apple 
   UNH     UnitedHealth 

Random reads

Scientists solve the mystery of ginger cats.

Duke the dog takes on a pack of coyotes.

Seriously deep sleeper not woken up by ship crashing into his garden.

Like a Tom Cruise stunt: hawk uses traffic patterns to target prey.

-Jamie Chisholm

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 23, 2025 06:51 ET (10:51 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.