Equities & Bonds: What’s Priced In?

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Welcome to 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:

  • The S&P 500 rose 4.05% in June, primarily driven by an improvement in valuations. On a macroeconomic basis, growth and liquidity have supported equities over the last year.
  • Treasury markets also witnessed sequential gains across all tenors, primarily driven by discount rate expectations. Currently, markets are pricing in approximately five cuts over the next eighteen months.
  • Overall, pricing in equities remains largely consistent with the underlying macroeconomic conditions. On the other hand, market expectations of five rate cuts remain inconsistent with the current backdrop of resilient nominal growth conditions.
  • Our strategies remain long equities and modestly long bonds. Our bond positions remain limited in size due to market pricing.

Full report can be accessed below:

The Observatory- 06.26.2024

 

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