Apologies for the delay in publishing this post. I was engaged in deeper thinking, away from all the screens, mapping out what the fourth quarter might bring. My thinking is still evolving as I take in tons of data and pricing, while my macro view manifests in the background.
In the meantime, we are faced with a very likely government shutdown, which will likely make NFP Friday a non-event. There aren’t many precedents of such an annoying occurrence, and it’s anyone’s guess how long this procedure might take.
The planning document for the government shutdown from the Department of Labour, for example, does not speak to how long it will take to resume data collection and data release schedules after the government reopens. In the 2013 shutdown, the September employment report was released five calendar days and three business days after the government reopened. It was similar timing to now, as it was initially scheduled for release on Friday, Oct 4, so the data were likely very close to finalised before the shutdown. More questions than answers, but that is certainly the new normal with this administration.
Regardless of whether the data is going to be available, my main points for a roadmap revolve around the following questions:
With nominal GDP running at around 4.5-5% and real rates projected to be at the terminal rate of 0%, is this really the correct policy setting? What are we fearing here?
Financial conditions are easy, and the wealth effect is still propping up consumption, driving growth. How broad is this effect shared, given that only a minority of wealth concentration benefits? Is the average household in recession?
Gold is on a spectacular run. Clearly a dominant macro trade in 2025. Is this heralding more Dollar weakness ahead? Gold is now outperforming stocks (SPX) over a 5-year horizon. Historically, that has signalled a commodity run. Are conditions in place?
Yield Curves have been flattening, while the steepening thesis is still very much in place. Is this a simple correction of the overall trend or something more pronounced, as bull flattening trends are generally very positive for forward-looking returns?
Stocks are expensive, yet they feel underowned, and the rally is hated by many professionals. With rate cuts still in the pipeline, what can really stop the ongoing rally?
These are my top-level thoughts, and I will share my view and conclusions with paying subscribers over the coming weeks.
The buy-and-hold portfolio has closed the 3rd quarter up 21.5% YTD, and we haven’t touched a single position since December 31st.
Let’s now read some of Macro D’s thoughts on geopolitics, before we analyse the weekly calendar and interpret the output of our weekly asset allocation model.
Let’s go!