The more things change - Mar. Macro Snapshot

The level of our Macro Risk Indicator remains bullish, but the impulses (i.e., rates of change) of growth and policy stimulus are slowing down. Macro fundamentals were resilient heading into the Iran shock, and the manufacturing recovery and “jobless growth” analogs we laid out in January are still intact.

The cyclical backdrop is still favorable for equities even if the pace of gains may slow from here. Among sectors, we are taking profit on our previous Energy overweight, swapping into Health Care, and remain overweight Technology and Financials.

Resilient growth and gradual disinflation (absent an energy shock) should keep 10y UST yields rangebound. Tactical and cyclical factors are pointing to a USD rebound.

Section Summary:

• Cyclical Asset Allocation: Resilient macro heading into Iran shock, macro risk indicator past peak bullishness
• Today vs 2022 Energy Shock: Inflation, policy in better place today vs 2022 energy shock
• Macro Analog Update: Amalgamated ’16, ’03 and ’99 still our base case
• Equity Sector Allocation: Taking profit on Energy, swapping into Health Care, keeping Tech & Financials OW
• Equity: US earnings strong, “Sell America” showing signs of excess
• Fixed Income: 10-year yields to remain rangebound around 4%
• FX: USD bottoming, energy price shock to hit overvalued Europe FX hardest
• Commodities: Gold miners still appealing, oil and gas rally unlikely to repeat 2022