Liquidity Views
The Liquidity Mix Has Shifted
Welcome to Prometheus Asset Allocation. The Prometheus Asset Allocation program offers a stable, macro-focused approach to asset management. Prometheus Asset Allocation aims to outperform a traditional stock and bond portfolio by leveraging our proprietary systematic macro process to rotate between 3 ETFs monthly (plus cash). As part of the program, we will be sharing our views on Growth, Inflation, and Liquidity in addition to our monthly video updates.
Today, we share our views on liquidity conditions. If you are unfamiliar with our approach to liquidity, we highly recommend referencing our Macro Mechanics note, which outlines our thinking:
What Is Liquidity?
The best information we can ever provide investors is the mechanics of how we think about macro conditions over time rather than what we think about them at any particular time.
Our primary takeaways are as follows:
Liquidity remains ample and continues to support risk assets.
Policy liquidity has begun to decline, driven by declining reserve balances and re-rating of policy rate expectations. Meanwhile, private sector liquidity continues to remain dominant, with repo activity remaining elevated.