1/ Income and spending are two sides of the same coin, with one person’s spending powering another person’s income.This relationship isn’t necessarily 1:1, as consumers can save income. Nonetheless, the pass-through is large:
2/ Currently, aggregate income remains supported by a high level of nominal wages and heightened employment. We see this in today’s economic data, where nominal personal income grew primarily as a function of increasing employee compensation:
3/ Employee compensation accounted for 51% of monthly income growth, which remains in line with its one-year trend. On an annual basis, employee compensation continues to power nominal income growth, and the drop-off in government benefits continues to drag on growth:
4/ However, these marginal increases in income were not allocated to spending but rather saved. We show the composition of the monthly change in income and its uses:
5/ In May, 51% of income increases were saved by consumers, effectively canceling out the growth in employee compensation. The impact of these increased savings was a decline in monthly outlays, i.e., a drag on personal spending, with 60% of sub-categories turning lower in May.
6/ Over the last year, Real Consumption has been in a downtrend though the latest print breaks this trend. This sequential acceleration was due to the drop-off of last May’s data, which showed a decline of -0.5%. We offer the monthly trend:
7/ This print disappointed expectations with a monthly change of -0.4% versus expectations of -0.3%. Motor Vehicles & Parts has been the most significant driver of these moves with a weighted year-over-year growth of -8.3%.
8/These weak areas of the economy tend to be highly responsive to the business cycle, i.e., they swing ahead of major inflections in the business cycle. They bode I’ll for the business cycle. We use these components to get a sense of the direction of GDP growth to come:
9/ You could have insights like these delivered to your inbox regularly, along with actionable signals and portfolios coming from a systematic, rule-based process-
All for free. Why wouldn’t you #subscribe?
$SPY is the core exposure for many. While the S&P 500 is a good asset over the long term, it can have big drawdowns.
What if you can keep all your S&P 500, but protect some of the downside?
1/ Enter Crisis Protection Program
2/ For a variety of reasons, many investors want to maintain passive exposure to the S&P 500. But the stock market can go through periods of very weak performance.
Our Prometheus Crisis Protection Program seeks to offer a diversifier during these periods of underperformance..
3/ It does so by rotating between gold, TIPS, and VIX futures.
Often, though, diversification can come at a price, i.e., reduced upside exposure to equity market rallies.
However, using a little bit of portfolio engineering, we can maintain all the equity upside...
A Portfolio With A 2.0 Sharpe Ratio During $SPY Drawdowns
The program seeks to offer a diversifier during periods of financial instability using $GLD, $TIP, & $VIXY
Launch Discount: 33% OFF.
1/ Our process 🧵
2/ Most investors are seeking to either match S&P 500 returns or outpace them over the long term. Regardless of whether investors seek to match our outperform equity returns, most investors seek higher risk-adjusted returns than simply holding market beta...
3/ These higher risk-adjusted returns can be achieved in two ways: time exposures to equity markets or increased diversification.
Our Crisis Protection Program leans primarily on diversification to create a portfolio that is biased to outperform during equity market downturns
Is The Current Labor/Output Relationship Sustainable?
In recent months, employment has softened significantly after a period of strength. This has often prompted the question as to whether activity will fall to reflect this weaker employment growth.
1/1 9 We evaluate 🧵
2/
As ever, before we describe mechanics before diving into these observations.
The core principle that drives this thread is that labor market growth via employment is the dominant driver of sustainable long-term growth in the economy.
This is because labor both earns….
3/ … and spends, and is the center point of economic activity.
Given this centrality of employment growth, it is rare in the macro economy for output to meaningfully deviate from labor market growth.
If output deviates from employment growth for a time, it is usually…
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.
Below we share a list of our most comprehensive Macro Mechanics notes. Enjoy!⬇️
1. Why Does GDP Growth Matter?
We offer our thoughts on what we consider table stakes in trading markets and a precise understanding of why Growth markets to investors.
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. We share our framework for thinking about bonds and how to time them. 🧵
Bonds are fixed-income assets issued by the government that offer compensation as a reward for migrating from cash. In turn, cash seeks to entice savers by offering a return that largely neutralizes the depreciation of money caused by inflation.
Thus, in order for a treasury bond to be attractive, it will seek to earn a return in excess of cash and implicitly seek to offset the impact of inflation over the course of its life. The life of a treasury varies by its tenor, ranging from a 3-month bill to a 30-year bond.