Darius recently hosted our May 2024 Pro to Pro Live to discuss the current Market Regime, the US consumer, key differences between retail and institutional investors, 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 According To The Current Market Regime

Our 42 Macro Risk Management Process transforms complex market dynamics into a clear and 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

We have remained in a REFLATION Market Regime since March. However, our quantitative and qualitative risk management processes indicate a growing probability of transitioning to a risk-off INFLATION Market Regime.

Investors should understand the key portfolio construction considerations for each Market Regime. If you need help understanding these high-impact portfolio pivots, we are here to help.

2. The Difference Between Retail And Institutional Investors 

The key difference between the average retail investor and institutional investor lies in their approach to market signals. Institutional investors have robust observational processes that allow them to adjust their positions when signals change. 

In contrast, retail investors usually build their portfolios based on their [oft-erroneous] predictions about the future, and when data disconfirms their narratives, they lack a robust-enough observational process to help them reposition their portfolio in time to make or save money.

We offer our clients these robust observational tools, helping them recognize when market and/or economic conditions shift so they can adjust their portfolio positions accordingly.

3. The West Village-Montauk Effect Is Contributing To The Resiliency Of The US Consumer

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, households have experienced a boost in wealth:

  • Household cash reserves have surged by 135%.
  • Household net worth has increased by 34%.
  • Nominal disposable personal income has increased by 27%.
  • Inflation has surged by 21%.

To date, this business cycle features household cash, net worth, and nominal disposable personal income each having grown at rates that have exceeded inflation.

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.