Gold

The market got excited by the 50 bps Fed cut and China stimulus. But these are a recognition that economies are slowing significantly. Stocks often rally after the first Fed cut, before falling sharply. Investors should stay defensive.

MacroQuant continues to recommend underweighting equities and overweighting bonds. This is consistent with the Global Investment Strategy Team's decision to downgrade global equities to underweight in late June.

The great US labor market shortage is over. Labor demand will likely fall short of supply by the end of this year, causing unemployment to soar. Neither fiscal nor monetary policy will be able to prevent the coming recession. Investors should underweight stocks and overweight Treasuries.

Concerns about the global economy have shifted from sticky inflation to faltering growth. Tight monetary policy is finally starting to bite. We suggest increasing portfolio defensiveness.

The consensus soft-landing narrative is wrong. The US will fall into a recession in late 2024 or early 2025. We were tactically bullish on stocks most of last year, turned neutral earlier this year, and are going underweight today. We conservatively expect the S&P 500 to drop to 3750 during the coming recession.