Happy Sunday from Copenhagen.

We made a major U-turn over the summer to align ourselves with the weakening of the labor market in the US. Thankfully, our nowcasting techniques give us a time-edge over the markets in assessing these peaks and troughs in the economic cycle ahead of major trend turns.

Our strategy is evolving, but we remain around 24% up since May 2023 in a pure-alpha, low-tail-risk portfolio setup, which is very promising. We will have more updates in the coming weeks as we reshuffle our offering at www.stenoresearch.com to provide you with better access to our nowcasting.

In relation to this week’s editorial, we’ve noticed that bonds are now performing as expected, with a negative 60-day running correlation to risk assets for the first time in a long while. This is a strong signal from the markets that inflation is no longer a key concern in asset pricing. We agree with this conclusion for now and expect the Fed to front-load cuts even further, as the labor market is currently not growing.

Read below for more charts explaining why that is.

Chart of the week: 60/40 portfolio is back!