What's Moving Markets
Stable NGDP Regime
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 continue to price the dominance of rising real growth and liquidity conditions. At the same time, inflationary odds remain elevated, which continues to support pro-NGDP assets. The combination of elevated but slowing NGDP is a support to equities over bonds and commodities.
Economic data momentum declined once again this week, driven by cyclical economic data. These declines continue to add to the evidence that we are in a slowing but growing economy.
The extension of this week's weakness could catalyse significant changes for markets. We continue to monitor these dynamics carefully.
Let's dive into the data driving our assessment before moving on to positioning. Over the last week macro asset markets rose in aggregate, with stocks lead gains both in terms of magnitude and path. Treasuries showed the weakest performance, though they posted gains as well.
Economic data fell further this week, driven by declines in construction, PMIs, and manufacturing payrolls. Cyclical slowing was salient in the data this week.
For a further understanding of how economic dynamics have been priced into markets, we show our tracking of market-implied macroeconomic regime probabilities.
Markets are pricing the dominance of rising real growth and liquidity conditions. This pricing is supported by fundamental macro conditions, suggesting regime stability. We allocate accordingly. Until next time.