Gravitational Edge is designed to give you a discernable edge in the two most critical areas of your business: asset management decisions and market-related client (prospective client) interactions.
This report, delivered each Monday, provides impactful and concise commentary, organized in a purposeful way, to deliver the maximum amount of actionable information.
Gravitational Edge will provide you with critical developments from around the globe and more importantly, we tell you explicitly how those developments should drive your decision making and conversations in the week ahead.
Every Gravitational Edge is divided into seven sections in order to deliver the most impactful financial market research in an effective and efficient manner to help you drive better asset management decisions.
Section 1: The Playbook
This section is where we discuss the most critical market developments from the prior week and spell out exactly how we would be investing across the globe, with a special emphasis on how we would be allocating assets to U.S. based markets.
Section 2: Macro Theme
This section is where the juice really gets squeezed. Wall Street has a very difficult time capturing data (both economic and financial market data) and contextualizing it, which is exactly how we generate our Macro Themes. It takes a disciplined approach to measure the slopes and extremes in economic and financial market data across all four major asset classes in twenty economies globally. While not every Macro Theme plays out, our research process, which is anchored to our Gravitational Framework, is right more often than not. Feel free to visit our Track Record to see a sampling of the market calls we have made over the last couple of years.
Section 3: The One Thing
The One Big Thing (is not in every report and only appears when there is an opportunity percolating) is a single trade idea from our universe of over two hundred markets and several thousand companies worldwide. The One Big Thing represents a trade idea, long or short, where the reward-to-risk is skewed heavily in our favor. Unlike our Macro Themes, which play out over months, the One Thing is focused on opportunities that are ripe now but may soon fade. These ideas are typically generated from a dislocation caused by catalysts in either our Quantitative or Behavioral Gravities.
Section 4: Asset Allocation Model
Our asset allocation model is driven by our Gravitational Framework as well as any active Macro Themes we are currently capitalizing on. Each week we share the five most bullish and bearish ETFs, as well as insight into why these ETFs are the right way to implement our current market views.This model is intended to capture major macro moves lasting months to quarters.
We believe in being accountable to our asset management calls, which is why we give a complete performance breakdown of our Asset Allocation recommendations. We know asset allocation and position sizing preferences are as individual as fingerprints. For the sake of performance tracking, we assume that each Asset Allocation recommendation represents a 10% allocation of an overall portfolio. The “Performance Contribution” and “Best and Worst Trades” tables present performance statistics based on this ten percent allocation assumption. Please review our disclaimer page for a complete understanding of how we report performance.
Section 4: Asset Allocation Model
Each week, we provide a complete breakdown for each of the ETFs in our Asset Allocation Model. We discuss developments in the prior week specific to that market as well as a detailed trading plan for the week ahead.
Section 5: Gravitational 15 Portfolio
The Gravitational 15 portfolio is a US-focused, large and mega cap equity portfolio built from our Gravitational Framework. We start with the prevailing Fundamental Gravity to dictate our sector concentration. We then utilize our Behavioral Gravity to find equities where investor perception has diverged from a company’s likely performance. Our equity Behavioral Gravity Index triangulates the perspectives of the three primary stakeholders in a company: Wall Street, buy side investors and corporate insiders. Our final filter is the Quantitative Gravity, to ensure we are investing in stocks with a bullish underlying market structure. Once all the Gravitational filters have been applied, we build an equally weighted portfolio of fifteen securities. The portfolio is rebalanced weekly but wholesale changes only take place three to five times each calendar year.
Section 6: What the Health
What the Health is our proprietary, and extremely comprehensive, monitor of the overall risks percolating across global financial markets. We don’t monitor investor sentiment measures like the CNN Fear and Greed Index or the AAII Bull and Bear ratio. We also don’t follow “market internals” like NYSE Advancers versus Decliners or the percentage of the S&P 500 above its 50-day moving average. These “indicators” make for good click bait but they don’t tell you diddly about risks percolating in financial markets. We provide readings on relevant factors across the six most critical areas where risks manifest: fundamental, liquidity, volatility, correlation, valuation and behavioral. In addition to the current reading, and the trend of each factor, we also provide you with a Health Rating. The Health Rating ranges from a low risk rating of “Healthy,” all the way to a high risk of “Stage 5.” This health ratings gives you a clear picture of the current health of financial markets, but more importantly how that health is changing as we move through time.
Section 7: Fundamental Gravity Overview
The Global Overview section summarizes the current Fundamental Gravity for each of the twenty economies we track as well as the asset classes in that economy most impacted, both positively and negatively. In addition, this summary provides a performance breakdown of the primary equity, fixed income and currency markets in those economies. We also provide a bias for every equity, currency and government bond market across all 20 economies.
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