Sectors

MacroQuant is tactically overweight equities, favors an above-benchmark duration stance in fixed-income portfolios, remains bearish on the US dollar, and is bullish on gold and copper.

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.

The economy is slowing, but not collapsing, and monetary easing is imminent — a backdrop that will benefit equities. We remain strategically bullish, with a close eye on GenAI and resilient earnings, even amid numerous risks. However, we are tactically cautious, as seasonality, elevated valuations, and stretched technicals present near-term headwinds.

Our Portfolio Allocation Summary for September 2025.

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 morning’s CPI report marginally tips the scales in favor of a September rate cut.

The US High Quality (USHQ) portfolio underperformed its benchmark through July, returning -1.5%, whilst its SPY benchmark returned 0.2%. On a trailing three-month basis, performance was notably weak vs. benchmark, with USHQ underperforming by approx. 750bps. 

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.