Oil
MacroQuant is recommending that equity investors keep their finger near the eject button but avoid pressing it for now. The model is warming up to the dollar again and sees scope for oil prices to rise.
An update on the key themes and views that will shape commodity markets through the remainder of 2025.
Acute geopolitical risks, like a massive oil shock, may be abating. But structural geopolitical risk remains high and could upset a blithe market. Cyclical economic risks are underrated as the US slows down and China continues to stumble. Investors should book some profits in anticipation of tariff implementation and a downturn in hard economic data.
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.
President Trump’s big beautiful bill will pass but faces near-term hurdles and will not tighten the government’s belt. It will combine with renewed tariff implementation to generate near-term risk for both the bond and stock market. The Iran crisis fizzled, saving Trump from a major oil shock that could have derailed his second term.
The escalating Israel-Iran conflict has boosted oil prices. We are positioning for further geopolitical escalation, uncertainty, and the economic fallout through two strategies that benefit from both near- and long-term upside.