What is 42 Macro?
42 Macro is Global Wall Street’s leader in macro risk management research and portfolio guidance.
Renowned for our differentiated frameworks, we deliver the highest quality analysis to help our clients consistently make money and protect gains across market cycles.
Founded by CEO Darius Dale, the 42 Macro team is composed of thoughtful individuals with extensive experience in the financial services and software development industries.
Who is the KISS Portfolio Construction Process for?
The KISS portfolio was expressly designed for retail investors and RIAs who are fed up with discretionary investment strategies that have caused them to consistently and demonstrably lag broad market returns.
42 Macro Founder and CEO Darius Dale also uses the KISS Portfolio Construction Process to manage his entire liquid net worth.
What makes 42 Macro research unique?
At 42 Macro, our mission is to provide the highest-quality macro risk-management guidance and analysis. We do this by continuously monitoring market dynamics, a wide range of economic indicators, and policy developments, ensuring our analysis is always current and accurate.
Our unique advantage is found in our systematic investment approach, which combines qualitative research with the distillation of quantitative risk management signals. Through this repeatable, data-focused process, we have consistently helped our clients generate returns across market cycles.
What is Dr. Mo?
“Dr. Mo” is the primary tool we use to help our buy side clients and sophisticated retail traders remain on the right side of market risk, which is shorthand for maximizing upside capture in bull markets and minimizing downside capture in bear markets.
How does Dr. Mo work?
If an ETF is bullish (or bearish) from the perspective of the 42 Macro Volatility-Adjusted Momentum Signal (VAMS) and that is in line with how the underlying asset should trade in the current Top-Down Market Regime, then Dr. Mo will prescribe a “LONG (or SHORT): Max Position” Proper Trade recommendation.
If an ETF is neutral VAMS and the underlying asset should be bullish (or bearish) in the current Market Regime, then Dr. Mo will prescribe a “LONG (or SHORT): Half Position” Proper Trade recommendation.
Why is Dr. Mo effective?
Dr. Mo helps clients overcome two of the most challenging behavioral heuristics that prevent investors from achieving their strategic investment objectives – the Action Bias, which describes our tendency to favor action over inaction, and the Illusion of Validity, which describes our tendency to be overconfident in the accuracy of our predictions.
At all times, investors are likely to experience the best performance by positioning their portfolios – or at least any incremental bets – in alignment with the Top-Down Market Regime. Responding to phase transitions in the Top-Down Market Regime early and with conviction is the key to remaining on the right side of market risk, which is shorthand for maximizing upside capture in bull markets and minimizing downside capture in bear markets.
We feature a collection of high-quality quantitative and qualitative signals throughout our macro risk management process to help clients build or erode conviction in the sustainability of the current Market Regime and develop conviction in what the next Market Regime is likely to be. Understanding the likely sequence and timing of Market Regime phase transitions ex ante is helpful to clients that prefer low portfolio turnover so they can anticipate how Dr. Mo’s Proper Trade recommendations are likely to evolve and allocate assets appropriately.
Understanding the likely sequence and timing of Market Regime phase transitions ex ante is not necessary, however. The 42 Macro Global Macro Risk Matrix Backtests prove just how effective it is to dispassionately respect the evolution of the Market Regime irrespective of one’s fundamental views. Said simply, the 42 Macro Discretionary Risk Management Overlay aka “Dr. Mo” proves investors do not have to predict the future to make and save lots of money in financial markets.
How should I use Dr. Mo?
Investors should first determine what a maximum and half position size corresponds to in their portfolio.
Then investors should allocate assets according to Dr. Mo’s Proper Trade recommendations, only changing positions when the corresponding Proper Trade recommendation changes.
Investors that require support determining which assets to focus on with their available capital should consult the “Key Portfolio Construction Considerations” at the bottom of the Dr. Mo slide.
Investors may also use the Market Regime and Volatility-Adjusted Momentum Signal (VAMS) data featured in Dr. Mo to implement a customized version of the 42 Macro KISS Portfolio Construction Process. Consult our KISS FAQ for more details.
What type of investor is Dr. Mo best suited for?
The 42 Macro Discretionary Risk Management Overlay aka “Dr. Mo” is optimized for the needs of professional investors – which have a dual focus on relative and absolute returns – and sophisticated retail traders operating hedged portfolios.
Will I get notified of changes regarding the KISS portfolio allocations?
Yes. Subscribers of the Macro Risk Manager and Macro Strategist Pro will receive real-time alerts to any changes to the KISS allocations or Dr. Mo recommendations via email and/or text. To manage 42 Macro alerts, log in and select Manage Notifications from the menu.
What if the current KISS allocations seem incongruent with 42 Macro’s Fundamental Research Summary or Quantitative Risk Management Summary?
KISS is not designed to trade every wiggle in global financial markets. Rather, KISS is designed to capture the bulk of the medium-to-long-term uptrends in the stock, bond, and crypto markets.
Investors implementing KISS should not attempt to reconcile KISS with any of our other signals. The only signals that clients need to execute KISS are on the KISS “Implement The Pie Chart” slide and in the “Dr. Mo” table if they are implementing a customized version of KISS. Refer to the other entries in our KISS FAQ for insights on how to implement a customized version of KISS. Everything else we publish is essentially irrelevant to you if you are implementing KISS, which we believe provides retail investors the best opportunity to retire on time and comfortably, with relatively minimal effort on the trading front.
All told, if KISS is fully allocated early in a cross-asset correction, please trust that KISS’ Top-Down and Bottom-Up Risk Management Overlays will do their jobs and protect client portfolios from unacceptable losses. Alternatively, if KISS is under allocated early in a cross-asset recovery, please trust that KISS’ Top-Down and Bottom-Up Risk Management Overlays will do their jobs and get client portfolios invested in short order. The quant models that drive KISS’ Top-Down and Bottom-Up Risk Management Overlays were expressly designed to accomplish these critical endeavors.