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At Prometheus, we are committed to equipping our clients with the most granular, high-frequency, and actionable understanding of macro conditions in the industry. We offer our clients a range of research solutions, from big-picture macro themes to actionable trading signals. In the spirit of giving back to the community, we are excited to offer an All-Access week in our Institutional Services. Each day this week, we will unveil one product offering from our extensive Institutional Offering. If you’re interested in institutional access, please contact us at [email protected].
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.
The Observatory – 4.18.2024 (Equities & Housing)
Our primary takeaways are as follows:
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The trend in housing data remains consistent with a cyclically stable economy, with building permits, starts, and completions maintaining their levels.
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Without a downshift in housing, housing employment or nominal investment is unlikely to enter a self-reinforcing downturn. The latest trends continue to signal the opposite, i.e., improving residential investment.
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Relative to these expectations, equity markets have moved to price in improving earnings expectations in a manner that now exceeds the fundamental macro impulse.
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Our Alpha Strategies find equities modestly ahead of the ongoing fundamental impulse and are modestly short. Our asset allocation strategies continue to view risk-controlled exposure to equities as appropriate.
This short exposure from our Alpha Strategies does not reflect a bet on recessionary conditions but on modest macro mispricing. These signals are modest in magnitude and have the potential to be resolved quickly. Thus, while our strategies are modestly short equities at this junction, cyclical dynamics remain largely inconsistent with a recession. As such, our asset allocation strategies continue to view the economic backdrop as one suitable for beta-capture for equities. Most recent housing data are consistent with these signals. Read the whole note below.
The Observatory – 4.18.2024 (Equities & Housing)
Until tomorrow.