Labor Market
The US economy remains on a path towards a recession, most likely starting in late 2024 or early 2025. For now, investors should maintain a benchmark allocation to equities, but employ a barbell strategy of overweighting defensives and materials.
European stocks have massively underperformed US ones since the GFC. Demographics and productivity say this trend will continue, but is that really so?
The US economy is in the “Overheating” phase, so stronger growth brings higher inflation. Tight monetary policy means recession is still likely over the next 12 months. Stay defensive.
MacroQuant sees significant downside risks to stocks over a 1-to-3 month horizon and suggests increasing allocation to long-term bonds. The model favours defensive equity sectors but is also hedging its bets by overweighting materials.
