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May 31, 2023 9 tweets 3 min read Read on X
1. Through April, our systems place Real GDP growth at 1.37% versus one year prior. Below, we show our monthly estimates of Real GDP relative to the official data: Image
2. Below, we show the weighted contributions to the most recent one-month change in real GDP, along with the recent history of month-on-month GDP. Additionally, we show the contribution by sector to monthly GDP in the table below. Image
3. April saw an improvement in investment activity, contributing significantly to GDP data. Combined with our inflation estimates, this place nominal GDP at 5.31% versus one year prior: Image
4. Overall, this picture does not look like one where inflationary pressures have cooled adequately for the Fed to begin the easing of monetary policy.
5. Against this backdrop, markets continue to be indecisive about their pricing of nominal growth conditions, which remain roughly unchanged (though somewhat recomposed, with a bias towards higher real growth vs. inflation). Image
6. This contextual understanding is extremely important for bonds. Especially, following the mixed reading we are getting from the bond trend factors (across both, the weekly asset class signal as well as the daily ETF signals). ImageImage
7. Markets continue to discount aggressive monetary policy easing by the Federal Reserve— only to be disappointed as data emerges to suggest this is unlikely. This sustained pattern in markets continues to create mixed trend readings in bonds.
8. The next likely sustained trend in bonds (if any) will be when bond market discounting aligns with the fundamental economic picture.
9. Said differently, the next sustained trend in bonds is likely to be if we begin to see recessionary conditions that force the Federal Reserve to cut interest rates more than currently discounted.

However, it doesn’t look like we will get there in the very near term.

#bonds

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More from @prometheusmacro

Feb 21
Our primary job as macro investors is to adapt as the macro regime shifts.

To do that, we need to recognize which regime we're in and then estimate what regime we could be in tomorrow.

1/5 What does this process tell us today? Image
2/5 Using a blend of fundamental & market data, we can try to estimate which of four regimes we can be in:

1. Rising Growth + Falling Inflation
2. Falling Growth + Falling Inflation
3. Rising Growth + Rising Inflation
4. Falling Growth + Rising Inflation

We expect to be in a mix of 1 & 3. Regime probabilities:

Rising Growth + Falling Inflation = 64%
Rising Growth + Rising Inflation = 36%
3/5 What does that mean for expected asset returns?

We can look to analogous periods in history where our regime forecasts were around these levels. We show these below:

We clearly see that growth assets outperform, & bonds underperform. Image
Read 5 tweets
Dec 15, 2024
Macro Mechanics🧵

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.

Link: prometheusresearch.substack.com/p/why-does-gdp…Image
2. Understanding Inflation

We offer our thoughts on how inflation works and its implications.

Link: prometheusresearch.substack.com/p/understandin…Image
Read 11 tweets
Dec 9, 2024
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.
Read 25 tweets
Dec 3, 2024
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 stocks and how to time them. 🧵
Before discussing how we think about making bets on the stock market, we briefly provide an overview of what a stock is. A stock represents a share of ownership in a company. When you buy a stock, you are a partial company owner.
Companies issue stocks to raise money for operations, expansion, or other projects. Investors are willing to invest in equities because they perceive the current price to be at a discount due to the uncertainty around the company’s operations being successful.
Read 28 tweets
Nov 13, 2024
Prometheus ETF Portfolio 3.0

1/ Prometheus ETF Portfolio was our first retail strategy, launched in November 2023. The strategy has achieved our goal of achieving strong risk-adjusted returns relative to cash with limited capital drawdowns in depth and duration: Image
2/ Prometheus ETF Portfolio aims to allow everyday investors to access an investment solution that combines active macro alpha, passive beta, and strict risk control, all in an easy-to-follow, low-turnover solution. Thus far, we have been successful in generating these outcomes.
3/ However, innovation has been the cornerstone of our evolution, and we’re constantly pushing forward our understanding of macroeconomic dynamics to further our edge in markets.
Read 15 tweets
Oct 11, 2024
While Labor Markets Weaken? 🧵

Employment growth has begun to deviate meaningfully from GDP numbers. This is unlikely to persist.

Will output come down to meet employment, or will labor markets accelerate?

1/23 Thread. Image
2/Employment & output are at odds. To understand what’s driving the gap between them, we examine each individually. We then reconstruct the gaps between spending & employment for major industries, allowing us to assess 1) what’s driving divergence, & 2) its sustainability
3/In terms of labor market mechanics, the two primary macro drivers of employment growth are changes in the labor force and changes in unemployment. Image
Read 23 tweets

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