Citi Quantitative Global Macro Strategy: Regime Model Update — Selectively Adding Risk via Regional RV
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Key Views
- Year-to-date, performance generated through the model's equity and commodity positions has been broadly positive.
- Regime clusters tend to be persistent, with limited transitions between them. Historically, the full recession regime has always shifted into either stagflation or a growth shock, while the "normal" regime state can transition into a broad set of other clusters, leaving its subsequent path comparatively uncertain.
- The QIS (Quantitative Investment Strategies) codes underpinning the framework have live dates ranging from 2015 to 2023, with historical data beginning earlier still.
Outlook
Cluster persistence, together with the limited transition paths observed historically, underpins the case for adding risk selectively through regional RV rather than through broad directional exposure, particularly given the wide range of clusters the "normal" regime can move into.
Key exhibits
Exhibit 1
Exhibit 2
Exhibit 3
