Macroeconomy Improving

Welcome to MktContext! I am a professional money manager, trader, and investor who has been timing and beating the market for over a decade. We specialize in predicting market direction by studying the economy and market signals. Join 12,000 subscribers at MktContext.com for our weekly deep dives and analysis!

We have been on record for several months now saying that the US is currently in an economic recovery/expansion, and there is little-to-no risk of recession. We expressed our view by remaining fully invested in stocks; no cash, no bonds, zero hedges. We recently rotated into small caps (IWM) to capture additional upside to the trend.

Last week, the January ISM manufacturing figure expanded at its strongest pace since 2022, beating all expectations. This figure has been stuck under 50 (contractionary territory) for several years now, and is just now entering expansion. Hence cementing the reacceleration narrative of strong economic resilience.

Under the hood, the details were also strong with new orders, production, backlogs, exports, and deliveries all surging. Prices only edged up slightly, showing inflation remains contained.

Historically, these index reversals mark the shift to risk-on conditions. This is good for cyclical and economically-sensitive stocks. According to ISM, nine sectors expanded, led by apparel, metals, transportation equipment, and machinery.

In fact, ISM reversals often lead risk assets such as S&P500 and Bitcoin prices to the upside. When growth signals accelerate, risk appetite follows.

Continue reading at MktContext.com to see our trades and portfolio.

Join 12,000+ macro investors who get these insights before the mainstream media catches on!