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Prometheus ETF Portfolio
Cash Stays King
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Welcome to our official publication of the Prometheus ETF Portfolio. The Prometheus ETF portfolio systematically combines our knowledge of macro & markets to create an active portfolio that aims to offer high risk-adjusted returns, durable performance, & low drawdowns. Given its systematic nature, we have tested the Prometheus ETF Portfolio through decades of history and have shown its durability. For those of you who are unacquainted with our systematic process, we offer a detailed explanation here:
In this publication, we will discuss the performance, positioning, & risks of the Prometheus ETF Portfolio— and it will be published every week on Fridays to help investors understand how our systematic process is navigating through markets. Before diving into our ETF Portfolio positions, we think it is essential for subscribers to understand the context within which our systems choose their exposures. Below, we offer our latest Month In Macro note, which contains the conceptual underpinnings of our systematic process within the context of the latest economic data:
Our latest Month In Macro is our best work yet, and we highly recommend you take the time to review the materials provided. As a supplement to the macroeconomic views provided, we provide our thoughts on price actions this week.
Over the last week, assets rallied in unison. Below, we show stocks, commodities, and bonds were up while the dollar sold off:
The strength of the moves in commodities has filtered through to the one-month pricing of rising growth outcomes. We show our market regime measures below:
While near-term pricing has been of rising growth, the distribution of regime probabilities remains flat, as highlighted above. Our non-linear trend process has worked well in navigating these conflicting market regime dynamics. For context— we have developed a set of trend filters to help us better evaluate the sustainability of asset-class moves. As always, we have tested these trend measures over time to understand whether they can help reliably generate an edge in markets. As proof of concept, we show how these combined signals have performed relative to an underlying portfolio of the same four assets.
These measures suggest long positions in stocks, short 10-year Treasuries, short commodities, and long gold.
We start by showing stocks:
And show the recent signal change in bonds to preferring short exposures:
Next, we show commodities that remain a prospective short:
And gold, which remains a diversifying long signal:
Given our outlook, as explained in Month In Macro, the shift in trend signal for Treasuries is particularly important, especially given that the market continues to price interest rate cuts. These look unlikely to materialize:
Within this context, we turn to the most recent performance of our systematic ETF process. Over the last week, the Prometheus ETF Portfolio was up by 0.36%. Below, we show the contributions to this portfolio performance across securities:
Turning to next week, our systems are looking to position the Prometheus ETF Portfolio, as shown below. The portfolio contains 16 positions heading into next week. We show these below:
POSITIONS: Cash: 55.77% USHY: 7.91% SPX : 3.87% XLI : 3.6% XLF : 3.44% XLB : 3.1% XLC : 2.91% XLK : 2.89% XLY : 2.81% XHB : 2.54% CANE: 2.43% FXB : 2.4% XLE : 2.1% SLV : 1.7% USO : 1.3% UGA : 1.2% . Please note if the cash position is negative, it implies leverage.
Additionally, we show these positions aggregated into asset class allocations below:
The portfolio has a net exposure (ex-cash) of 44.23%, with a gross exposure (ex-cash) of 44.23%, i.e., it is long-only. This allocation has an expected volatility of 4.95%, with a maximum expected volatility of 10%.