At Prometheus, we are committed to equipping our clients with the most granular, high-frequency, and actionable read of macro conditions in the industry — translated, every day, into systematic signals across global markets. Prometheus Institutional gives our clients access to our tracking of fundamental conditions via The Observatory, daily updates to our Macro Regime Probabilities, our signal-based views on global markets from The Monitor, and machine-readable signals from the Prometheus Multi-Strategy Program. From time to time, we share insights from Prometheus Institutional that we believe will be useful to the broader investment community.
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Every day at midday, we share updates to our US Macro Regime Probabilities with Prometheus Institutional, along with our synthesis of what the current regime probabilities suggest.
Our Macro Regime Probabilities use our bottom-up signals across asset markets to construct forward-looking estimates for the cross-asset macro market regime. These signals incorporate both fundamental and price-based information to produce high-frequency, forward-looking estimates for the US cross-asset environment. These signals are best used as a forward-looking guide for the cross-sectional returns across macroeconomic assets. We define the regimes as follows:
(+) G (-) I: Rising Growth & Falling Inflation, Equities Outperform
(+) G (+) I: Rising Growth & Rising Inflation, Commodities Outperform
(-) G (-) I: Falling Growth & Falling Inflation, Treasuries Outperform
(-) G (+) I: Falling Growth & Rising Inflation, TIPs Outperform
Synthesis: Our Macro Regime Probabilities continue to show a dominance of rising probabilities for growth and inflation. The regime mix remains biased toward rising growth. This regime continues to favor equities and commodities over fixed income, with the near-term more likely to favor equities. Below, we visualize the systematic application of this view over time, scaling our exposure to a portfolio that is long stocks, long commodities, and short fixed income based on regime-similarity:
Rising growth and inflation regimes have become more regular after a period of dormancy from 1980 to 2020. We continue to believe that asset allocation needs to adapt to reflect this shift.
Until next time.