This publication is a short excerpt from our weekly Prometheus ETF Portfolio note. While we reserve our forward-looking views on macro and portfolio construction to paid subscribers, we offer our high-level diagnostic of macro conditions here as we aim to offer value to the broader public.
Find attached our data deck:
For those unfamiliar: The Prometheus ETF Portfolio aims to allow everyday investors to access an investment solution that combines active macro alpha, passive beta, and strict risk control, all in an easy-to-follow, low-turnover solution. We aim to achieve strong risk-adjusted returns relative to cash, with limited capital drawdowns in depth and duration. We do this in a highly accessible package, which rotates between five highly liquid ETFs, readily available to any investor with a brokerage account. You can sign up for it here:
Let us dive into our assessment of macroeconomic conditions:
Markets moved to price in rising real growth and liquidity conditions following the FOMC press conference.
Economic data momentum expanded significantly, pushing equities higher.
While the economy remains strong, industrial activity continues to face pressures.
Let's dive into the data driving our assessment before moving on to positioning. We begin by examining the path of asset price returns over the last week:
As we can see above, equities offered the best combination of consistency and risk-adjusted returns this week. This pricing came as economic data momentum rose significantly this week:
As we can see above, economic data momentum rebounded this week, driven by housing, PMI, and jobless claims data. For a further understanding of how economic dynamics have been priced into markets, we show our tracking of market-implied macroeconomic regime probabilities below, which reflect the aforementioned dynamics:
Markets continued to price regime probabilities consistent with a rising real growth and liquidity environment on a trend basis. We see this as largely consistent with the overall economic picture. We allocate accordingly. Until next time.