Research service with the goal of democratizing finance. Making institutional-quality insights and research available to the public.
Nov 6 • 9 tweets • 4 min read
PROMETHEUS ETF PORTFOLIO: LAUNCH
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Details below. 2/ The 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 model portfolio. The results speak for themselves:
Sep 3 • 22 tweets • 4 min read
🧵Is Monetary Policy Ineffective?
1/ Policy rates have risen in historic fashion, but activity remains resilient. Monetary policy lags are well known, but the drivers of lags are less discussed. We offer our thoughts on the mechanics of policy transmission. 2/ Over almost every economic cycle, the Fed responds to high inflation by raising interest rates. The increase in these interest rates is pushed through the banking system and through asset prices to create a tightening of financial conditions...
Aug 15 • 23 tweets • 4 min read
🧵The Next Stages Of The Growth Cycle
1/ Tightening liquidity has resumed. This is a pressure on all assets. The question remains how these pressures will be distributed between assets - which will depend on how these tightening pressures impact the growth cycle. We discuss. 2/ Th treasury has now extended the duration of its issuance while the Fed continues to keep interest rates elevated and roll off its balance. The combination of these pressures is a tightening of liquidity conditions. The mechanics of how these factors come together to paint...
Aug 2 • 25 tweets • 5 min read
🧵The Impact Of Treasury Issuance
1/ In H2 of 2023, the Treasury is set to issue close to approximately $1.9 trillion in new borrowing. This will likely have significant impacts on liquidity and macro markets. We discuss our views. 2/ Before we dive into the impacts, we think it is important to describe the mechanical impact of Treasury issuance. There are two major impacts. The first is the effect on nominal GDP, and the second is the impact on the liquidity ecosystem.
Jul 24 • 25 tweets • 4 min read
🧵Why Hasn't The Recession Materilized?
1/ The Fed has tightened policy, yield curves have inverted, & leading indicators have contracted. Yet, economic data continues to show resilience, and asset markets have held up, causing a great deal of debate.
We offer our thoughts. 2/ Before we start discussing the drivers of recession, we think it is important to define how we think about recessions. The technical definition of a recession and its classification is defined by the NBER. While this is a fairly rigorous evaluation...
Jul 13 • 20 tweets • 4 min read
🧵Thoughts On The Inflation Environment And What It Means For Markets
1/ Inflation remains one of the most important drivers of macro markets today. However, the subject remains well-debated. We offer our thoughts on how we see the picture and what it means for markets.... 2/ Previously, we have shared our bottom-up analysis of inflation subcomponents to assess where inflation will land. We will once again share those estimates with our subscribers soon. For the purposes of this post, we will outline our thoughts on the macro drivers of inflation.
Jul 10 • 22 tweets • 4 min read
🧵Notes From Our Latest Month In Macro
1/ Last month, we 45 pages on why we thought it made sense to be flat stocks & short bonds. Short bonds paid off well. Being flat stocks was an opportunity cost vs. cash. It didn't help, but it also didn't hurt. We update our thoughts: 2/ Starting with the bottom- line:
Our systems think that today's economic situation once again warrants flat stocks & bonds for long-only investors. For active investors, our cycle strategies suggest shorting bonds. We discuss the nuance further...
Jul 6 • 22 tweets • 4 min read
🧵Understanding & Contextualizing Liquidity
1/ Much has been said about liquidity on this platform. Furthermore, there has been a good deal of oversimplification on the subject. In this thread, we share our conceptual framework for liquidity & help contextualize where we are.. 2/ Let us first begin by defining liquidity & why it matters. In our definition, liquidity is the flow of cash and cash likes assets that potentiate spending in both the financial & real economy. Importantly, liquidity is a measure of balance sheet potential. We explain further..
Jul 4 • 17 tweets • 3 min read
🧵Thoughts On Real Estate In Context Of The Current Economic Cycle
1/ Real estate is considered an important barometer of both economic health &the business cycle. Real estate has seen cross-currents during this slowdown, leading to confusion in the diagnosis. We discuss... 2/ Real estate is part of GDP under the category of investment. It is an important variable, as while it does not account for a very large part of total GDP, it has significant variability, which can meaningfully impact GDP growth..
Jul 3 • 23 tweets • 4 min read
🧵A Comprehensive Framework For Macro Investing
1/24 Recently, @menon_aahan joined @Globalflows to talk about our framework for macro investing. Subsequent conversations led us to believe that a more detailed exploration is required. In this thread, we share our framework.... 2/ As macro investors, we are trying to understand how the biggest themes in the economy drive asset prices. At the end of the day, our objective is to use our understanding to express more well-informed views than others in markets to generate outperformance...
Jun 29 • 5 tweets • 1 min read
An important dynamic to recognise is that the majority of market gains are being driven by liquidity.
1/5 However, an extremely large part of these gains are coming from pro-cyclical liquidity, i.e. coming from private sources as a bi-product of high nominal activity….
2/5 what’s important to recognise about these flows is that they are far more sensitive to private sector profit and income conditions than public sector liquidity….
Jun 28 • 7 tweets • 2 min read
Manufacturing Orders & Industrial Equities
The big takeaway from recent new orders manufacturing data has been an improvement in the recent trend in new orders.
1/ The current path in data is inconsistent with a recessionary path: 2/ We project recessionary conditions beginning in H1 of 2024, and big-picture conditions continue to paint the path to a recession.
Jun 21 • 12 tweets • 3 min read
🧵 On Liquidity Improvement
1/10 Liquidity is the flow of cash & cash-like assets that potentiates economic and market activity. In this thread, we discuss some of the components of the liquidity ecosystem. Particularly, we focus on short-term liquid assets: 2/ There are two dimensions two liquidity: private-sector liquidity and public-sector liquidity. The Fed’s slowing of its liquidity drain has stabilized public sector liquidity. On the other hand, sustained nominal income has continued to flow through to private sector liquidity.
Jun 20 • 18 tweets • 5 min read
On Industrial Production & PMIs
1. As of the latest available data, our PMI composite now shows a reading of -10.93. PMIs are generally strong directional indicators of where we are in the profit cycle. 2. This is because PMI respondents manage inventories and orders in response to their outlook on revenue and profitability.
Jun 19 • 9 tweets • 5 min read
The Weekly Recap (12.06.23 ~ 16.06.23) 🧵
Missed out anything from a week full of #Macro & #Markets? Don't worry - we got you covered.
Below we share all the updates & opinions threads from last week. Make sure to follow @prometheusmacro for much more.
1. While #households create most of the spending in the economy, businesses engage in investment and employment to generate profits. Therefore, sustained #consumption is contingent upon companies using labor to create output. 2. Typically, when output has declined, employment has followed suit. We show this in the visualization above.
Jun 15 • 8 tweets • 5 min read
1. CPI #Inflation increased by 0.12% in May, surprising consensus expectations of 0.1%. This print contributed to a sequential deceleration in the quarterly trend relative to the yearly trend. 2. Above we show the monthly evolution of the data relative to its 12-monthly trend and consensus expectations.
Jun 15 • 6 tweets • 4 min read
Treasury Market Signal 🧵
1. CPI Inflation increased by 0.12% in May, surprising consensus expectations of 0.1%. This print contributed to a sequential deceleration in the quarterly trend relative to the yearly trend. 2. However, we think it is important to note that excluding food and energy, i.e., core CPI, was up 0.40% this month— implying a 4.9% annualized rate for core inflation. This data is far removed from the Fed’s objective.
Jun 14 • 6 tweets • 3 min read
CPI Preview vs Realized CPI
1. #CPI data came out largely in line with our expectations. Our expectations were for a print of 0.17%, while the print came in at 0.10%. Below, we show the composition of our estimates relative to the realized print: 2. Our pre-view note mentioned two factors we would be watching out for. First, we were looking to see whether #motor vehicle inflation remains persistent.
Jun 14 • 6 tweets • 2 min read
On Govt Spending
1/ Fiscal spending has been a support to GDP as shown below. We are likely approaching the peak of this fiscal impulse. With increased borrowing, somewhat offset by expected increase in cash balance, fiscal spending is likely to be less supportive of GDP: 2/ Fiscal spending can come from one of three places. Existing cash, new borrowing, or revenues. So far, cash spending has dominated:
Jun 13 • 9 tweets • 3 min read
On Fiscal Impulse
1. Recently we examined the latest data on US #government spending, i..e, US #fiscal impulse. Monthly spending data from the government contains significant #volatility; therefore, we apply a smoothing process to extract spending trends in government data. 2. Above, we show our estimates of the monthly changes in US government spending. We decompose this spending into its sources, i.e., government revenues, borrowing, and cash balances.