Commodities & Energy Sector
In this Q4 Strategy Outlook, we discuss where we stand on our recession call, the outlook for stocks and bonds in various scenarios, why investors are misunderstanding the impact of AI on corporate profits, whether the US dollar has entered a structural downtrend, our perspective on the yen, gold and other commodities, and much more.
MacroQuant sees downside risks to stocks over a long-term horizon but is not yet saying that we are at imminent risk of an equity bear market.
This week our three screeners highlight plays in global small-cap value stocks, gold miners, and stocks exposed to an exciting structural investment theme: Space.
The fact that the yellow metal’s rally has defied headwinds from key cyclical drivers suggests that the bull market is structural, not cyclical. Buy gold and gold mining stocks in absolute and relative terms.
MacroQuant’s US equity z-score is dangerously close to the -1 threshold. Moves below that threshold have reliably coincided with equity bear markets in the past. As such, MacroQuant recommends an underweight on stocks, offset by an overweight on bonds and cash.
Investors should modestly underweight equities in their portfolios and look to turn more aggressively defensive once the whites of the recession’s eyes are visible. We think that will happen within the next few months.
