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Stock Market Predictions To End 2024!

Darius recently joined our friend Anthony Pompliano, where they discussed the 42 Macro Global Macro Risk Matrix, the outlook for the global economy, AI-related productivity growth, and more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio: 

1. What Does Our Global Macro Risk Matrix Indicate About The Direction of Asset Markets?

We are currently in an era of peak noise. At 42 Macro, we help our clients cut through the noise, and our Global Macro Risk Matrix is one of the most powerful tools we have built to do that.

Looking at our Global Macro Risk Matrix, we have seen a battle between GOLDILOCKS and DEFLATION since the end of June. Currently, DEFLATION has the highest share of confirming markets, but the strength of that signal is low—only in the 27th percentile of data going back to January 1998. 

This suggests that market participants are still uncertain which Market Regime will prevail. We expect this debate is likely to resolve in favor of GOLDILOCKS, but we could see asset markets price in DEFLATION over the short term.

2. How Will The Global Economy Influence Asset Markets Over The Medium Term?

At 42 Macro, we provide historical data and forward projections for the Bottom-Up GRID Regime across major global economies.

According to our models, many economies are in or moving toward a GOLDILOCKS regime through the end of this year.

In our view, this shift could create positive momentum for asset markets in the medium term. Although the U.S. economy’s GRID sequence generally carries more weight than the rest of the global economies, it is promising to see global economies providing tailwinds rather than the headwinds experienced from mid-2021 to the end of 2023.

3. How Will AI Impact Asset Markets Moving Forward?

Productivity growth is positive for asset markets because it allows the economy to grow with disinflationary pressure. When productivity rises, you typically see margin expansion, which supports labor market growth without triggering the inflationary impulses that would cause corporations to cut jobs – a dynamic that persists today.

However, we believe we have not yet seen substantial productivity gains from AI.

As a result, we do not believe AI will be the dominant driver of asset markets in the near term. That said, if AI turns out to be as significant as many expect, it will have an enormous impact on the future of the economy.

That’s a wrap! 

By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you know you deserve. 

This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.

If you don’t change your process, how can you expect to get better results?

Over 2,000 investors around the world confidently make smarter investment decisions using our clear, actionable, and accurate signals—and as a result, they make more money.

If you are ready to join them, we are here to support you.

When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime without penalty.

How To Win In The 2024 Financial Marketplace

Darius hosted our friend Scott Diddel on this month’s Pro to Pro, where they explored Scott’s comprehensive presentation on understanding the basics of how to allocate assets from a tax-advantaged perspective.

If you missed the interview, here are the three most important takeaways from Scott’s presentation that can help you plan for your financial future:

1. How Do Inflation And Taxes Impact Long-Term Investments?

The impact of inflation and taxes on long-term investments is staggering.

A $1 investment in large-cap stocks from 1926 would have grown to $2,533 today without the impact of inflation and taxes. When taking into account the impact of taxes alone, the amount is reduced to $672. When both taxes and inflation are considered, the value plummets to $48. This represents a shocking 98% decrease from the nominal return to the actual return in your bank account.

Allowing your money to sit idly exposes it to the erosive effects of taxes and inflation. As an investor, you should actively strategize to implement tax-efficient strategies and preserve your wealth over time.

2. What Are The Tax Implications of Different Investment Vehicles?

Investment vehicles are categorized based on their tax treatment: “Tax Later,” “Tax Now,” and “Tax Once and Never Again.”

Qualified plans like 401(k)s and IRAs fall under “Tax Later,” offering tax-deferred growth until you withdraw the investment. “Tax Now” includes outside investments, such as stocks and bonds, which generate taxable income annually. Lastly, the “Tax Once/Never Again” category features options like Life Insurance Retirement Plans (LIRPs), providing tax-free growth and distributions.

Understanding these distinctions is crucial for optimizing your investment strategy. Each category offers unique advantages, allowing investors to tailor their portfolios to their specific financial goals and tax situations.

3. How Can A Life Insurance Retirement Plan (LIRP) Enhance Retirement Distributions?

A Life Insurance Retirement Plan (LIRP) can significantly boost after-tax retirement income.

In a scenario without a LIRP, a desired $250,000 distribution results in only $170,000 after taxes. By incorporating a LIRP, the same distribution yields $208,000 after taxes. This $38,000 annual difference amounts to an additional $760,000 over a 20-year period.

LIRPs achieve this through tax-free growth and distributions, complementing traditional retirement accounts and outside investments. This powerful tool offers a tax-efficient way to supplement retirement income, helping you earn additional income in your retirement years.

That’s a wrap!

By now, you’ve likely realized that piecing together an investment strategy from finance podcasts, YouTube videos, and macro “gurus” on 𝕏 is not delivering the results you deserve.

This kind of approach only leads to confusion from conflicting advice, frustration from mediocre returns, and exhaustion from the emotional rollercoaster of your portfolio swings.

If you don’t change your process, how can you expect to get better results?

Over 2,000 investors around the world confidently make smarter investment decisions using our clear, actionable, and accurate signals—and as a result, they make more money.

If you are ready to join them, we are here to support you.

When you sign up, you’ll get immediate access to our premium research and signals—and if we’re not the right fit, you can cancel anytime.

How Much Longer Can The Bull Run Last?

Darius joined our friend Paul Barron this week to discuss the outlook on inflation, Bitcoin, the US economy, and more. 

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio: 

1. Inflation Is Likely To Decline Over The Next Three To Six Months

At 42 Macro, we find it more insightful to track inflation using three-month and six-month rates of change than the year-over-year rate, which tends to meaningfully lag the market cycle. 

Using the three-month rate of change, our analysis indicates a significant increase in the rate at which shelter CPI and housing PCE are decelerating, indicating that the general trend of inflation is heading lower over the medium term.

However, if asset markets remain buoyant, the anticipated disinflation priced into consensus expectations and forecasted by the FOMC may not materialize over the medium term.

2. Although Bitcoin Is Likely To Reach High Valuations, The Path To Get There Is Uncertain

In the interview, Darius and Paul watched a clip from the All-In podcast in which Chamath Palihapitiya, the founder, and CEO of Social Capital, discussed potential price targets for Bitcoin over the next 18 months. Darius agreed with two aspects of Chamath’s analysis: omitting data from the first cycle and including time horizons for the price targets. 

However, we believe his analysis lacked a critical component: the path Bitcoin takes to reach those targets. To that point, we have yet to experience the typical median max drawdown seen in liquidity cycle upturns. Our research indicates that the median max drawdown for Bitcoin in a liquidity cycle upturn is around -61%. 

A decline of just half of that magnitude will cause many investors to exit their positions prematurely. At 42 Macro, our goal is to help investors stay in the market while avoiding significant drawdowns of their portfolio along the way.

3. Growth And Inflation May Pose Risks To Markets As We Reach Q1 2025

As we head into 2025, two primary risks loom over the markets. 

First, growth is likely to slow to levels that would worry many investors by Q1 2025. Second, inflation is likely to bottom out sometime in Q4-Q1 at a level inconsistent with the Fed’s 2% target.

Overall, we remain in a risk-on Market Regime and do not yet believe it is time to book the significant gains we and our clients have achieved since we called for the bull run at the start of November. However, after the next three to six months, forward-looking markets will likely recognize that growth and inflation trends in 2025 may not be as supportive as they are now.

That’s a wrap! 

If you found this blog post helpful, explore our research for exclusive, hedge-fund-caliber investment insights you can act on today.

Navigating Conflicting Economic Data

Darius joined Charles Payne on Fox Business last week to discuss the US economy, inflation, the Fed, and more.

If you missed the interview, here is the most important takeaway from the conversation that has significant implications for your portfolio:

Recent Economic Data Gave Conflicting Signals To Investors. A Systematic, Rules-Based Investing Approach Is The Best Method To Generate Positive Returns In Today’s Confusing Macro Environment.

That’s a wrap! 

If you found this blog post helpful, go to www.42macro.com to unlock actionable, hedge-fund-caliber investment insights.

Risk On Or Risk Off?

Darius joined our friend Anthony Crudele last week to discuss the current market regime, the 42 Macro Positioning Model, inflation, and more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio: 

1. Our Positioning Model Nailed The Correction In Risk Assets 

Heading into this month, our 42 Macro Positioning Model, which tracks several short-term tactical indicators, including the AAII Bulls-Bears Spread, S&P 500 Implied Correlations, and AAII Cash Allocation, flagged an elevated risk of a tactical pullback.

These indicators suggested the market was overextended from a short-term perspective.

Whether a geopolitical catalyst occurred or not, we expected a pullback. 

2. The “Immaculate Disinflation” Theme Is Dead

The latest March PPI and CPI figures supported our “Sticky Inflation” theme. Super Core CPI surged to 7.9% on a three-month annualized basis, three times the pre-COVID trend and well above the Fed’s 2% inflation target.

Across most sub-categories of CPI and PPI, as well as leading indicators like NFIB or the UMich surveys, there is an array of disconfirming evidence in the “Immaculate Disinflation” narrative. At this juncture, we believe that the “Immaculate Disinflation” theme is over.

3. “Sticky Inflation” Is Not Bearish In Isolation 

Our “Jay And Janet Want A Soft Landing” theme hinges on two key factors. First, the Federal Reserve is more dovish than necessary. Second, Treasury net financing policy is contributing to favorable liquidity dynamics in this general election year. 

Given these ongoing dynamics, we maintain that investors need not worry about inflation pressures in isolation. Unless the Fed or Treasury takes action to address sticky inflation, we believe asset markets can continue to perform well over a medium-term investment horizon.

That’s a wrap! 

If you found this blog post helpful:

1. Go to www.42macro.com to unlock actionable, hedge-fund-caliber investment insights.

2. RT this thread and follow @DariusDale42 and @42Macro.

3. Have a great day!

Fed’s Policy On Inflation Is A ‘Step In The Wrong Direction’

Darius joined our friend Maria Bartiromo on Fox Business last week to discuss the Fed’s policy on inflation and what it means for asset markets.

If you missed the interview, here is the most important takeaway from the conversation that has significant implications for your portfolio: 

The Fed Is Kowtowing To Fiscal Dominance, And We Believe It Will Accept Higher Than 2% Inflation Over The Long Term

That’s a wrap! 

If you found this blog post helpful:

1. Go to www.42macro.com to unlock actionable, hedge-fund-caliber investment insights.

2. RT this thread and follow @DariusDale42 and @42Macro.

3. Have a great day!

Managing Risk in a Risk-On Environment

Darius joined Caroline Woods on Schwab Network last week to discuss the current risk-on Market Regime and its implications for asset markets.

If you missed the interview, here is the most important takeaway from the conversation that has significant implications for your portfolio: 

The Market Remains In A Risk-On Regime, And We Believe It Has Room to Run

That’s a wrap! 

If you found this blog post helpful:

1. Go to www.42macro.com to unlock actionable, hedge-fund-caliber investment insights.

2. RT this thread and follow @DariusDale42 and @42Macro.

3. Have a great day!

What Does REFLATION Mean For Your Portfolio?

Darius joined Adam Taggart on Thoughtful Money this week to discuss the current REFLATION Market Regime, the resiliency of the US economy, the US consumer, and more.

If you missed the interview, here are the three most important takeaways from the conversation that have significant implications for your portfolio: 

1. Investors Should Position In Line With The Current REFLATION Regime

Our 42 Macro Risk Management Process simplifies complex market dynamics into a straightforward three-step approach:

  1. Position for the Market Regime
  2. Prepare for regime change using quantitative signals with our Macro Weather Model
  3. Prepare for regime change using qualitative signals via our fundamental research

Currently, we are in a REFLATION Market Regime. In this environment, investors should consider the following key portfolio construction considerations:

To consistently stay on the right side of market risk, investors should position in accordance with the prevailing Market Regime. 

2. The Resilient US Economy Does Not Require Rate Cuts, But The Fed Wants To Cut Rates Anyway

According to the March 2024 Fed Dot Plot, the Fed is guiding to three rate cuts in 2024, three in 2025, and three in 2026.

At the same time, the US Economy continues to prove resilient across various metrics, including income, consumption, and the labor market. 

While we maintain the view that the resilience of the US economy does not justify rate cuts, the Fed’s inclination towards cutting rates has served as a positive driver for asset markets. 

3. The US Consumer is Resilient Because of The West Village-Montauk Effect

The essence of the “West Village-Montauk Effect” can be summarized as follows: With a substantial stock of savings, there is less pressure to save a significant portion of your disposable income. 

We are witnessing this effect in relation to the US consumer. Since the close of 2019, both households and corporations have experienced a boost in wealth:

This notable growth primarily occurred due to government spending during 2020 and 2021, which included COVID-related tax breaks, forgivable PPP loans, and extensions of jobless claims. A considerable portion of this expenditure entered private sector balance sheets. Simultaneously, as household and corporate net worth expanded, the monthly flow of US Personal Savings turned negative, demonstrating the eagerness of US consumers to spend a higher share of their disposable income due to the elevated stock of savings.

That’s a wrap! 

If you found this blog post helpful:

1. Go to www.42macro.com to unlock actionable, hedge-fund-caliber investment insights.

2. RT this thread and follow @DariusDale42 and @42Macro.

3. Have a great day!

How Long Will The Fed Hold?

Darius sat down with Maggie Lake last week on Real Vision’s Daily Briefing to discuss the recent transition to REFLATION, NVIDIA earnings, China, and more.

If you missed the interview, here are three takeaways from the conversation that have significant implications for your portfolio: 

1. The Market Regime Transitioned From GOLDILOCKS to REFLATION Last Week

We utilize the 42 Macro Global Macro Risk Matrix to nowcast the prevailing Top-Down Market Regime. We do this via scoring the 42 most crucial macro markets globally via our Volatility Adjusted Momentum Signal (VAMS) and GRID Asset Market Backtests. These scores are then tallied, with the regime encompassing the highest number of markets emerging as the Top-Down Market Regime.

As of last week, REFLATION, characterized by a risk-on environment where investors tend to be rewarded for assuming higher risks due to perceived acceleration in nominal economic growth or better than expected economic performance without policy constraints, now holds the largest share of confirming markets. 

We anticipate that this risk-on Market Regime is likely to persist until around midyear. For consistent performance, investors should align their portfolios in accordance with the prevailing Top-Down Market Regime.

2. The Tech Bubble Is Likely to Persist At Least Until Around Midyear

In its quarterly earnings release last week, NVIDIA reported a revenue of $22.1 billion, surpassing analysts’ estimates by $1.7 billion, which had projected revenue to be $20.4 billion. 

Prior to the release, the 42 Macro Positioning Model indicated that positioning data from commodity trading advisors (CTAs) and market-neutral hedge funds indicated a probability of a further short-term market correction. The earnings release indicated NVIDIA beat their revenue estimates by 8%, and despite a temporary dip in response to the news, the stock surged by 24% over the next two days.

We don’t believe the tech bubble is likely to become unwound at this current juncture, especially if REFLATION persists as the Top-Down Market Regime over the next quarter or two.

3. PBOC Policies This Year Have Largely Supported Asset Markets 

Since December, we’ve called for Beijing to implement front-loaded policy support as we entered 2024. 

That’s what we’ve witnessed, as the PBOC has been actively implementing monetary policies to support the economy. Its balance sheet is expanding, claims on banks are rising, and it is reducing the loan prime rate while committing to providing additional lending to specific sectors of the economy. 

Through these measures, the PBOC is attempting to revive the Chinese economy. Instead, it is positively contributing to global liquidity, bolstering the risk-on Market Regime in asset markets.

That’s a wrap! 

If you found this blog post helpful:

1. Go to www.42macro.com to unlock actionable, hedge-fund-caliber investment insights.

2. RT this thread and follow @DariusDale42 and @42Macro.

3. Have a great day!

Is There Still A Risk of Recession?

Darius sat down with Anthony Pompliano last week to discuss interest rates, the Fed, the election year, and more. 

If you missed the interview, here are three takeaways from the conversation that have significant implications for your portfolio: 

1. Lower Worker Turnover Is Supportive of Economic Expansion

The Federal Reserve is closely monitoring the ratio of JOLTS Total Job Openings to Total Unemployed Workers as a measure of labor market slack or tightness. This ratio currently stands at 1.4, which remains above its pre-pandemic levels, indicating a tight labor market that is still relatively tight. 

The Private Sector Hires Rate, holding steady month-over-month at 3.9%, is below the trend observed from 2015 to 2019, suggesting a cooling in hiring momentum. The Private Sector Quit Rate (PSQR) declined to 2.4%, its pre-pandemic level. 

Lower turnover rates, as observed in recent quarters, are supportive of economic expansion by alleviating wage pressure within the labor market.

2. The Probability of A Recession Remains Low

At 42 Macro, we have identified five key leading indicators that are most effective in helping investors predict and position for recessions in their portfolios: the University of Michigan Employment Survey, the Conference Board Labor Survey Differential, the Continuing Claims/Total Labor Force ratio, Cyclical Unemployment, and Temporary Employment.

Among the 42 Macro Fab Five Recession Signaling Indicators, only the Temporary Employment metric signals a significant risk of recession. In contrast, three of the indicators suggest a low probability, and one presents a moderate risk level. 

As a result, we believe the likelihood of a recession remains low at this current juncture. 

3. Asset Markets Are Likely To Generate Positive Returns Throughout 2024

Several positive factors, including a positive fiscal impulse, a resilient economy, and declining inflation, are currently bolstering asset markets. Additionally, stock markets tend to perform well during an election year, especially when the incumbent candidate is from the Democratic Party. 

However, the landscape is somewhat different now compared to the beginning of last year, marked by a decrease in both underpositioned investors and companies trading at reasonable valuations.

Consequently, while we do not anticipate the S&P 500 to replicate its 20% performance from last year, we do believe it may achieve positive gains in line with historical average returns.

That’s a wrap! 

If you found this blog post helpful:

1. Go to www.42macro.com to unlock actionable, hedge-fund-caliber investment insights.

2. RT this thread and follow @DariusDale42 and @42Macro.

3. Have a great day!