The burden of proof - August Macro Snapshot

Today’s ugly NFP data crystalizes the Q3 US growth scare we warned about, but the balance of data we track still points to a slowdown, not a recession.

Beyond the US slowdown, we see most global central banks easing policy and a recovery in our Eurozone and China leading indicators. This has pushed our cyclical Macro Risk Indicator into “risk on”.

However, the model was NOT designed to capture shocks like tariff costs. Therefore, we are waiting for more data during the seasonally weak August and September periods before going overweight risk assets. For now, we maintain a balanced allocation, preferring TIPS (vs nominal bonds) and large caps (vs small caps).

• US Labor: Deteriorating, but not recessionary
• US Growth: Slowing, but ultimately resilient
• US Inflation: Tariff impact still barely visible in CPI, won’t prevent Fed cuts
• Global: Global excess liquidity is positive, favors EM for first time since 2018
• Cyclical Asset Allocation: Wait to embrace “risk-on”, Macro Risk Indicator does not capture tariff costs
• Equity: US earnings LEI still recovering, buy the dip in select energy names and Brazil
• Fixed Income: US 10y yield around fair value, real yields still too high, too few Fed cuts priced
• FX: Tactical dollar rebound has room to run, but cyclical outlook remains mixed
• Commodity: Commodity outlook improving, oil price has found a floor