Based on the Global PMI, a widely followed data set, in addition to the short leading economic indicators at EPB Macro Research, economic growth peaked in January 2018, the most recent pivot point you should have made in your portfolio allocation.
Inside EPB Macro Research, we have been writing about the historical performance of assets and equity sectors during different periods of growth and inflation.
Tomorrow, we will be highlighting the average excess return of various assets and equity sectors during periods of accelerating growth and decelerating growth.
Since January 2018, the last pivot point, asset and sector returns are nearly perfectly consistent with the historical analysis suggesting defensives should be leading and cyclical sectors lagging.
While consensus is overly focused on short-term valuation measures, the largest gains have been missed by most investors in defensive equity sectors such as utilities due to a lack of attention on the growth rate cycle.
At EPB Macro Research, in our model portfolio published to members, we have been long XLU and short KRE since May 2018 based on this pivot, capturing a greater than 30% spread in these sectors in just over 12 months.
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If you understand the economic cycle, you can profit from the opportunities that emerge from its ebb and flow.
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You will understand where to put your money and when to move it in all stages of the economic cycle.
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