How Do You Invest During An Expanding Business Cycle With A War In The Background?
Macro Cycle Allocations
The latest macroeconomic data continue to show an economy in expansion, with extremely elevated inflation volatility. We work through how our process is navigating this backdrop.
We show how nominal growth remains stable below:
This stability of nominal GDP continues to be largely driven by strong domestic spending conditions in the form of strong consumer spending:
Consistent with an economic expansion, equities continue to exhibit the strong trend in the cross-section of US macro assets.
The S&P 500 remains within range of its recent highs as the economy continues to expand, corporate profits remain strong, and recession risk remains limited. This continues to fuel corporate earnings:
However, there remain price-based risks to forward equity market returns. Below, we visualize the macro factor decomposition of equity market returns into returns from growth, inflation, policy, and the equity risk premium:
