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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:
- Cyclical conditions have improved in the economy, with manufacturing measures showing sequential gains in line with cyclical conditions. However, the magnitude of these gains remains muted, weighing on overall corporate profitability.
- Zooming in, factors such as a weakness in sales, low levels of production, and high labor cost pressures continue to pose significant headwinds for manufacturing profits.
- Relative to these pressures, commodities continue to price in highly favourable conditions, creating the potential for a mispricing.
- However, the divergence is not large enough to create commodity shorts. Therefore, our strategies continue to hold modest exposures to long commodities.
You can read all the data and analysis driving this assessment in the link below. Until tomorrow.