Long Gold & Commodities
Welcome to our official publication of the Prometheus ETF Portfolio. The Prometheus ETF portfolio systematically combines our knowledge of macro & markets to create an active portfolio that aims to offer high risk-adjusted returns, durable performance, & low drawdowns. Given its systematic nature, we have tested the Prometheus ETF Portfolio through decades of history and have shown its durability. For those of you who are unacquainted with our systematic process, we offer a detailed explanation here:
In this publication, we will discuss the performance, positioning, & risks of the Prometheus ETF Portfolio and it will be published every week on Fridays to help investors understand how our systematic process is navigating through markets. Before diving into our ETF Portfolio positions, we think it is important for subscribers to understand the context within which our systems choose their exposures. Below, we offer our detailed Month In Macro note, which contains the conceptual underpinnings of our systematic process within the context of the latest economic data:
Our team is taking a short break for the holiday season this week, so we’ll keep our commentary concise for this note. This week, the Prometheus ETF Portfolio was down 0.50% due to weak performance in fixed-income positions. A large portion of this weakness came amidst a global policy shock from the BOE, ECB, and BOJ, which came together to pull capital from US assets to the countries of these respective central banks. This shock was not a significant deviation from our fundamental outlook of weakening growth and stabilizing high inflation amidst a tightening liquidity backdrop. Below, we show the contributions to this week’s returns:
Regarding our fixed-income positions, our systems have removed the exposure as part of their risk mitigation process. Below, we show our positioning for the Prometheus ETF Portfolio next week:
The allocation above has an expected volatility of 7.5%, with a maximum expected volatility of 10%. Given the concentration of positions in commodities, the portfolio has significant potential to achieve maximum volatility. Overall, our positioning reflects the predominance and persistence of stagflationary nominal growth. The potential for slowing inflation remains in place, but the first derivatives of inflation remain elevated. We continue to allocate with the cycle. For additional color, we share some of our market timing tools to help contextualize the positions within the broader economic context.
-
GLD: Gold has transitioned into a Bear Market from a Bear Market Rally. Nonetheless, current market pricing shows potential for a reversal, creating beta capture opportunities.
-
CANE: Sugar remains in a Bull Market. Consistent with this, current market pricing suggests beta capture opportunities.
-
SOYB: Soybeans remain in a Bull Market. Consistent with this, current market pricing suggests beta capture opportunities.
-
DBC: Commodities remain in a Bull Market Correction. While we are in a correction, our gauges suggest Bull Market conditions continue to support beta capture opportunities.
-
CPER: Copper has transitioned into a Bear Market from a Bear Market Rally. Nonetheless, current market pricing shows potential for a reversal, creating beta capture opportunities.
-
SLV: Silver remains in a Bull Market. Consistent with this, current market pricing suggests beta capture opportunities.
-
USO: WTI has transitioned into a Bull Market Correction from a Bull Market. While we are in a correction, our gauges suggest Bull Market conditions continue to support beta capture opportunities.
-
UGA: Gasoline remains in a Bull Market. Consistent with this, current market pricing suggests beta capture opportunities.
We will continue to update the Prometheus ETF Portfolio through the holiday season, and our more detailed commentary will resume in the new year. Happy holidays.