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More Commodities, Less Equities
Welcome to The Observatory. The Observatory is how we at Prometheus monitor the evolution of both the economy and financial markets in real-time. Here are the top developments that stand out to us:
Personal consumption expenditures continue to deteriorate in line with incomes. On a nominal basis, as we expected, COVID-19 rebound sectors are now normalizing their spending trends:
Personal Income was significantly negative on a YoY basis, though it remained positive on a nominal MoM basis. However, this came with a continued drawdown in savings rates, i.e., less income was saved, and more was spent- consistent with a lack of excess income.
It’s time to stay clear of Equity longs. Even if they are tactical, it likely makes sense to size these positions minimally. Our systems have recalibrated this week, and are our position monitor is sown below:
Currently, the Prometheus Alpha Strategy is LONG: BCOMTR, WTI, Brent Crude, Heating Oil, Gasoline, Lean Hogs, Copper, Gold. Our Beta Rotation Strategy is currently LONG: Commodities. A Market Regime Portfolio would be allocated to Stocks & Credit: 4.8%, Commodities: 53.1%, Treasuries & IG Debt: 0%, Gold & TIPS: 5%, Cash: 37.3%.
We’ll skip our systematic updates today and resume next week. We will also provide our Week Ahead guidance over the weekend. Stay Nimble!