Echoes of 2016, 2003 and 1999 - Weekly Wrap

Chart of the Week

Since 1990, there have only been 5 previous instances when our Macro Risk Indicator was as bullish as today.

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Research This Week

Echoes of 2016, 2003 and 1999: Signposts to watch - Jan. Macro Snapshot | [Watch Discussion]

• Our Macro Risk Indicator has only been as bullish as today on five occasions. None of these past moments since 1990 can be a perfect match, but three stand out: 2016, 2003 and 1999.
• Events in Venezuelan show that history is rhyming again. The United States is re-asserting strategic control over the Western Hemisphere. This was Pillar #1 in our recent thematic, The Primacy of Sovereignty.

Macro Analogs

• Cyclical Asset Allocation: Macro Risk Indicator as “risk-on” as ’16, ’03, and ’99
• 2016 Signposts: Manufacturing recovery after rolling recession
• 2003 Signposts: “Jobless” recovery with rising productivity
• 1999 Signposts: High valuations and speculative mania with generational IPO

By Asset Class

• Equity: Consensus optimism vs sound macro => energy/financial/tech barbell, EM, value
• Fixed Income: US 10y fair value range of 3.75% - 4%, watch the SOFR curve
• FX: More nuanced outlook for USD, but APAC vs EUR remains key divergence
• Commodities: Commodity outlook still strong, but parabolic metals rally due for pause