Mike and Richard are joined by Aahan Menon of Prometheus Macro for a discussion on systematic macro investing. Aahan begins by challenging the utility of long-term macro forecasts, arguing they are largely ineffective for improving portfolio performance and advocating for shorter trading horizons. He then details his investment framework, which involves dynamically tilting portfolio exposure between carry, trend, and mean reversion based on evolving macroeconomic circumstances. The conversation also explores a curious and significant divergence currently observed between labor market data and broader economic output.
Topics Discussed
• The philosophy of providing macro research for free while charging for portfolio implementation
• A critique of long-term macro forecasting's ineffectiveness for improving portfolio returns
• An investment framework based on the three core factors of carry, trend, and mean reversion
• Dynamically tilting between core factors based on evolving macroeconomic conditions and signal strength
• Integrating fundamental data as a diversifying signal within the carry, trend, and reversion framework
• Aggregating bottom-up signals from individual assets to form a macro view, rather than imposing a top-down narrative
• The use of a crisis protection program combining long volatility with positive carry assets like TIPS and gold
• Skepticism towards common liquidity measures and a preference for financial conditions indices
• The importance of adapting models to structural economic shifts, such as the move to a services-based economy
• An underappreciated divergence between strong economic output and a weakening labor marke
