Cyclical Asset Allocation: Improving macro outlook driven by liquidity, policy, and growth

Most of the leading indicators we track are improving.

There is a synchronized easing cycle among the major central banks, which has pushed up our Business Cycle Financing Index. This has usually been supportive for growth and asset prices. Our individual central bank regime models also show that most central banks are in easing mode, confirming the supportive policy backdrop.

The majority of growth leading inputs are now improving vs last quarter, driving up our diffusion index and suggesting global economic surprises are biased higher over the next two quarters.

Global excess liquidity continues to improve, as global money growth exceeds economic growth. This is important as the excess money creation tends to be supportive of asset prices.