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.
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Let us dive into our assessment of macroeconomic conditions:
Markets moved to price in modestly more disinflationary conditions over the last week. However, on a trending basis, markets continue to price in the dominance of inflationary conditions.
Economic data momentum decreased this week. However, these declines came as GDP data disappointed expectations, though several higher-frequency measures continued to improve.
The economic expansion remains in place; however, liquidity conditions have begun to slow, which further weighs on risk.
Let's dive into the data driving our assessment before moving on to positioning. Over the last week macro asset markets rose in aggregate, however, the distribution of gains was shifted to disinflationary assets, i.e. stocks and bonds. Golds and commodities saw a weaker path of returns.
Economic data momentum fell this week, primarily driven by weak GDP data and PMIs. Under the surface, durable goods orders, housing, and labour data held up economic data momentum.
For a further understanding of how economic dynamics have been priced into markets, we show our tracking of market-implied macroeconomic regime probabilities.
Markets have now moved to dominantly price inflationary conditions, a significant shift for asset markets. We allocate accordingly. Until next time.