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Today, we share a note from The Observatory. The Observatory is how we at Prometheus monitor the evolution of the economy and financial markets in real-time. The insights provided here are slivers of our research process that are integrated algorithmically into our systems to create rules-based portfolios.
Our primary takeaways are as follows:
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The latest CPI data points to inflationary pressures largely inconsistent with the Fed’s achieving dynamics consistent with its 2% objective.
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Services prices remain well-supported, while goods prices will likely face some pressures. We see the net impact of these forces as an inflation rate that stays modestly above the Feds target.
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Relative to these expectations, treasury markets are pricing outcomes consistent with a recession, resulting in a return to the Fed’s 2% inflation objective. At the same time, term premia remain depressed relative to government asset supply.
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Our Alpha Strategies favor exposure consistent with a steepening of the yield curve. At the same time, we also find a modest signal to be short bonds. Bond beta remains unattractive for asset allocators.
You can read all the data and analysis driving this assessment in the link below. Until tomorrow.