Market Cycle Guidebook - January 2025
Asset class views, macro outlook, long-term expectations, and over 70 charts tracking macro policy, cycle data, and valuations across a global multi-asset universe...
We’ve just published the latest "Market Cycle Guidebook" — it’s one of the main reports in our institutional research service (see details + key findings below).
The monthly Market Cycle Guidebook is a key resource for investors — providing insight into the stage of the business cycle, monetary policy trends, leading indicators, earnings momentum, valuations across multiple different assets and markets, long-term return expectations, and tactical asset allocation views.
Key Findings from the Latest Monthly pack:
Global monetary policy settings are increasingly shifting from headwind to tailwind as inflation falls and economic cycle data remain soft.
The major macro dilemma for investors at this stage is the tails; resurgence risk on the one end (growth reaccelerates, inflation resurges), and recession risk on the other end (recession takes hold, deflation comes into focus).
The second coming of Trump likely exacerbates this, with a puzzling policy path potentially pushing up inflation, but also raising recession risk (it will all depend on what gets implemented, how quickly, to what degree, and the second order effects e.g. with fiscal consolidation).
The main upside risks for growth assets would be: a macro middle path (goldilocks, policy perfection), China stimulus, Trump taking a prudent + growth friendly policy path, and in markets a major upside would be a series of bullish rotation trades…
Among the asset classes most at risk given valuations and the stage of the cycle are US tech stocks, US housing, US dollar, and corporate credit.
Areas which see superior upside risk/reward meanwhile include government bonds, commodities, emerging markets, and certain sectors on a tactical basis such as defensives, gold(miners), small caps, and frontier markets.
Rotation and Relative value are thus key themes along with smart diversification and risk management (diversify diversifiers, tactically upweight more attractively priced diversifiers + when technicals align: these matters are discussed in our Weekly Macro Themes report, which covers specific ideas).
(check out the full report to see the charts, views, and recommendations)
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More information About the Monthly Pack
The monthly Market Cycle Guidebook is designed to be a practical & tactical asset allocation guidebook for global multi-asset investors +those who require visibility and insight on the big picture macro-risk outlook.
The images below provide a sense of what’s covered:
The pack focuses on illuminating the key drivers of risk and return across a global multi-asset universe, with the objective of generating actionable conclusions and meaningful insights for medium-term active asset allocation decisions.
The pack is of particular use to those with a longer-term timeframe and who need fact-based chart-driven evidence to support decision making, or those who take shorter-term positions but still want a pulse-check on the macro trends and themes that will ultimately filter through to short-term market outcomes.
Pick of the Pack — Global Equities’ Sales Growth
This month’s pick of the pack is a chart showing global median sales growth rates across 45 countries. Sales growth collapsed in 2023/24 as the global economy slowed (notably China, Europe) and importantly — as the great disinflation took hold.
Recall: sales growth is highly sensitive to nominal growth, and inflation actually increases nominal growth (and corporates bank this in the form of higher sales… at least to the extent they can raise prices and maintain enough volume).
But things are changing now heading into 2025.
Sales growth is recovering, we are seeing less countries with declining Year over Year sales, and the overall median growth rate is turning up. This fits perfectly with my global growth reacceleration thesis, and reflects one upside of the end of disinflation. One key implication of this is that it will likely see global ex-US equities benefitting disproportionately vs US equities — as global earnings have been stagnant/declining vs US earnings soaring. The market is priced for USA’s strong earnings, and so it will be no surprise if the US keeps keeping on, but the market is priced for bad earnings for global ex-US and the biggest surprise would be an upswing in earnings; likely culminating in valuation re-rating too.
So a very important chart indeed.
Key features of the Market Cycle Guidebook:
-Instant overview of: global economic cycle, monetary policy, and valuations
-Market performance snapshot & commentary/highlights
-Summary views across asset classes (short and medium term); "cheat sheet"
-TAA/DAA guide visually mapping those views to recommended positioning
-Monthly updated Capital Market Assumptions
-And of course, over 70 charts illuminating the key medium-term drivers of risk and return across a global multi-asset universe
-Australia/New Zealand appendix (since we're down this part of the world!)
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Best regards,
Callum Thomas
Head of Research and Founder, Topdown Charts
About the Service:
The Topdown Charts Professional service caters to multi-asset portfolio managers and investment professionals. The service comprises a set of reports focused on identifying opportunities, risks, and emerging (investment-relevant) macro trends — along with personalized service to help make the portfolio managers' job easier. With the service we deliver a flow of investment ideas, risk management input, and meaningful macro insights to help you make better decisions, ,achieve your targets, and equip you with resources for communications with your clients and stakeholders.
Our Head of Research and founder spent his career on the buy-side, and our reports reflect that perspective with a clear "so what?" focus rather than research just for research sake. The reports are punchy + chart focused, and are easy to read both in terms of speed and understanding: our clients often end up saving time and getting better insights. So if you're looking for a dedicated world class research service to help make your job easier, give us a try.