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Leading indicators point to “risk-on” cyclical outlook - Sep. Macro Snapshot
Risk of a tactical wobble (weak seasonality, stretched CTA exposure) does not take away from bigger picture: cyclical macro backdrop is improving.
Q3 US growth scare fading, global liquidity rising, and most central banks easing in sync.
We would look to start shifting away from our balanced allocation, preferring equities over fixed income.
We are not blind to high valuations in US indices, but we see pockets of relative value in energy and healthcare sectors as well as select emerging markets. Within fixed income, we still prefer TIPS vs nominal bonds.
Notes
Cyclical Asset Allocation: LEIs show “risk-on” tailwinds, as US growth scare fades
Cyclical Asset Allocation: Improving macro outlook driven by liquidity, policy and growth
US Growth: Still resilient growth LEI, as GDPNow and services recover
US Growth: Household savings rate falls again, fiscal deficit remains large
US Inflation: First sign of inflation pass-through, one to keep an eye on
Equity: Earnings LEI steady but high US valuations suggest being selective
Fixed Income: Tactical signals suggest long-end yields biased higher
FX: Tactical and cyclical bullish in
dicators aligning for a US dollar rebound
Commodities: Commodity outlook continues to improve, stick with gold exposure