Certainly Uncertain

AQR

Jordan Brooks

Research

11 Pages

AQR Capital Management examines how volatile macro conditions translate into uncertainty and what that means for asset allocation. Jordan Brooks uses macro uncertainty indices to show that prediction errors on growth and inflation remain elevated compared with calmer pre pandemic years. He then connects this backdrop to higher market volatility and argues that investors should prepare for a wide range of economic paths.

Date published: May 16, 2023

Key Takeaways

Macro uncertainty defined: Captures how unpredictable key economic releases are relative to forecasts across many data series.
Why it stays high: Persistent policy tradeoffs and cross market disagreement keep uncertainty elevated instead of fading quickly.
Portfolio implications: Encourages broader diversification beyond equity using bonds, commodities and liquid alternatives that can handle varied macro outcomes.
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