What's Moving Markets?
Growth Expectations Pullback Modestly
This publication is a short excerpt from our weekly Prometeus 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 modestly weaker real growth conditions, with liquidity pricing weighing on assets.
Economic data momentum drove a significant portion of this pricing, with goods-sensitive economic data disappointing expectations.
While economic data moderated marginally, aggregate nominal conditions remain strong, and inflationary pressures look stable.
Let's dive into the data driving our assessment. We begin by examining the path of asset price returns over the last week:
As we can see above, assets generally followed a mixed path this week, though equities and treasuries show the best path of returns. These returns came as goods-sensitive data (retail sales & industrial production) saw weakness. Additionally, inflation data surprised expectations, weighing on all assets as markets moved to price in fewer cuts by the Fed, a dynamic that has continued for more than a year now. Below, we show how economic data momentum pulled back modestly over the last week:
For a further understanding of how economic dynamics have been priced into markets, we show our tracking of market-implied macroeconomic regime probabilities below, which reflect the aforementioned dynamics:
These conditions are broadly consistent with our nowcasting of macro conditions:
This dynamic suggests that we remain in an economic expansion, and markets will continue to price this regime. We allocate accordingly. For the complete 15-page note, click below: