Asset Allocation Watch: Macro Regime Indicator – Introducing our brand new asset allocation model
Welcome to our monthly Macro Regime Indicator update. We aim at updating you on our base-case projections for liquidity, inflation and growth and how to optimally allocate according to the regime based on our empirical beta studies in the brand new asset allocation model available in our data-hub.
We highlighted how liquidity, inflation and growth would all decline through June, which proved to be the correct projection. Liquidity shrank around $300bn through the month, inflation declined from from 4.9% to 4% and ISM declined from 46.9 to 46.0.
A month ago we wrote that ”In June, liquidity trends will turn more diverse with EUR liquidity falling off a cliff, USD liquidity dwindling slowly and JPY liquidity continuing to increase. Given that inflation dynamics keep improving/decelerating fast, we’d argue that a cocktail of US Tech/AI/Discretionary exposures and Japanese stocks remain the winners in equity space for the month ahead, while duration is likely to perform in USD and EM currencies”
This was a pretty decent benchmark-beating allocation through June, so let’s have a look at how the model suggests that we position for the month of July.
Chart 1: The Macro Regime will maybe change slightly for July