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 have moved to decisively price in rising real growth outcomes and elevated liquidity conditions. These conditions remain consistent with ongoing fundamental conditions, which suggests the potential for regime stability.
Economic declined significantly this week with cyclical economic indicators showing weakness. These trends continue to point to an ongoing slowing of the economy.
If extended, they create contractionary pressures. We remain in the very early days of these conditions, and we remain far removed from contraction.
Let's dive into the data driving our assessment before moving on to positioning. Over the last week macro asset markets were flat in aggregate. Stocks showed gains despite an inconsistent path. Broader assets suffered, with gold showing the most losses.
Economic data momentum declined significantly this week. Retail sales, housing data, and jobless claims drove these declines. The economy continues to slow.
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 moved back towards pricing in a rising real growth and liquidity environment. Inflationary pricing has receded, consistent with a slowing but growing economy. We allocate accordingly. Until next time.