Select your local site for products and services by region

Americas
Latin America
United States
United States Offshore
Asia Pacific
Australia
Hong Kong
Japan
Singapore
Europe
Austria
France
Germany
Italy
Spain
United Kingdom
Location not listed?
International
Fixed income
Active fixed income investments uncover yield and value opportunities while mitigating risk. Tap into Natixis Investment Managers’ expertise.
September 18, 2024
Portfolio analysis & consulting
In-depth portfolio analysis to identify and measure sources and drivers of risk and return that can be applied to asset allocation in client portfolios.
Tools of the Trade
Tap into insights, portfolio analysis techniques, and educational tools to explore trends, navigate rapidly changing markets, and uncover opportunities.
Diversity, Equity and Inclusion
We continually work to create an environment that promotes diversity, equity and inclusion in all its forms, across gender, race, religion, sexual orientation, disability, ethnicity and background.
Macro views

Macro market analysis playlist

September 23, 2024 - 3 min read

Macro market trends and themes

Portfolio Strategists Jack Janasiewicz, CFA® and Garrett Melson, CFA® specialize in analyzing global capital market trends, identifying themes and risks, and applying those observations to asset allocation and portfolio construction. Each month they highlight five key macro trends to watch in Charts & Smarts®.

September 2024 highlights

Am I Losin’: The market’s focus is now squarely on the labor side of the mandate, given the softening we’ve witnessed and the recent trigger of the Sahm Rule. And although unemployment tends to be inertial, you need to have a reason as to why that trend of softening continues. Much of the rise in unemployment has been a function of increasing supply colliding with low hiring rates. But the typical feedback loop that feeds that inertia is a function of softer consumption and layoffs; however, if revenues are holding up and margins are expanding, there’s little reason to expect a wave of aggressive layoffs.

Simple Man: This is a Taylor Rule Fed, and with the inflation gap rapidly closing as core PCE quickly approaches target as the unemployment gap has already closed on recent softening, the implication for policy is clear. The balance of risks has swung back to the labor side of the mandate, with upside risks to unemployment now far larger than upside risks to inflation. The data itself provides plenty of ammunition for the Fed to commence its easing cycle and move quickly back to a more neutral stance.

Comin' Home: While the recent debate has been all about the size of that first cut, a secondary debate continues to rage with respect to how many cuts are priced into rate markets. Markets may be a little overzealous in pricing in 225 basis points (bps) of easing by June 2025, but as inflation has cooled to target, real policy rates have ratcheted to their most restrictive levels. Though it’s impossible to say what neutral is with certainty, real policy rates appear to be at least 150bps restrictive based on a wide range of neutral estimates. The magnitude and pace of cuts are a function of both the magnitude of hikes and the timing of the start of the easing cycle, both of which suggest a large and rapid recalibration given the shifting balance of risks.

Free Bird: Soft landings may be rare, but midcycle adjustments, where the Fed recalibrates policy in the midst of an ongoing expansion, are not. Since 1971 we’ve seen at least eight examples of these midcycle adjustments. While markets have grown accustomed to rates falling down the elevator shaft, a more benign recalibration of policy has tended to be supportive for both the real economy and risk assets.

I Got the Same Old Blues: While midcycle adjustments have historically been bullish up and down the cap spectrum, the extent of that support is not homogenous. It all boils down to the growth outlook. Midcycle adjustments have tended to stabilize conditions as opposed to drive a strong reacceleration in growth expectations in the subsequent 12 months. That has tended to see large-caps continue to outperform small-caps. The start of the easing cycle is likely to continue to favor large over small until we begin to see a brighter growth backdrop taking shape for 2025.

Resources

Archived macro market analysis

A monthly look back at economic themes.

Learn more 

Curious to learn how macro trends can inform investment decisions?

CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.

This material is provided for informational purposes only and should not be construed as investment advice. The views expressed may change based on market and other conditions.

Natixis Advisors, LLC provides discretionary advisory services through its division Natixis Investment Managers Solutions and nondiscretionary advisory services through its Portfolio Analysis & Consulting Group.

Natixis Distribution, LLC is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers.

Natixis Advisors, LLC is one of the independent asset managers affiliated with Natixis Investment Managers.  

 

7025229.1.1