August 2022
View From the EDGE®
DeFred Folts III Eric Biegeleisen, CFA®
Managing Partner Partner, Deputy Chief
Chief Investment Investment Officer
Strategist
About 3EDGE
3EDGE Asset Management, LP, is a multi-asset
investment management firm serving institutional
investors and private clients. 3EDGE strategies act
as tactical diversifiers, seeking to generate consis-
tent, long-term investment returns, regardless of
market conditions, while managing downside risks.
The primary investment vehicles utilized in portfo-
lio construction are index Exchange Traded Funds
(ETFs). The investment research process is driv-
en by the firm’s proprietary global capital markets
model. The model is stress-tested over 150 years of
market history and translates decades of research
and investment experience into a system of causal
rules and algorithms to describe global capital mar-
ket behavior. 3EDGE offers a full suite of solutions,
each with a target rate of return and risk parame-
ters, to meet investors’ different objectives.
3EDGE Asset Management, 303 Congress Street Suite 501, Boston, MA 02210
T 844.903.3343 W 3edgeam.com
Threat of Stagflation Persists
Despite the recent rebound in the U.S. equity markets (the S&P 500 rose by
over 9% in July), based upon our most recent model research, the U.S. econo-
my still faces the threat of stagflation. Therefore, we continue to focus on invest-
ments that could outperform in a stagflationary environment. This includes U.S.
Treasury Inflation-Protected Securities (TIPS), lower duration U.S. Treasuries,
and real assets such as gold and commodities that could benefit from inflation
proving to be more persistent than expected.
In July, the Federal Reserve raised short-term interest rates by 75 basis points
(0.75%) for the second time in two months to combat elevated inflationary pres-
sure. The Fed has now increased short-term interest rates four times thus far
in 2022. The bond market also rallied in July (yields declined and prices in-
creased). The yield on the 10-year U.S. Treasury fell to 2.57% in July after
reaching almost 3.5% earlier in the year. On the economic front, the U.S. Gross
Domestic Product (GDP) declined for the second quarter in a row prompting
a debate over whether the U.S. economy may be in a recession. In addition,
the Commerce Department’s Personal Consumption Expenditures (PCE) price
index, which is the basis for the Fed’s inflation target, rose by 1% in June, the
fastest monthly increase since 2005. The PCE rose by 6.9% from June of 2021.
Equities:
▶ U.S. Equities: U.S. equity markets rallied in July with the S&P 500 rising
over 9% - its best month since November 2020. Tesla, Apple, Amazon, and
Nvidia rose by over 15% during the month. However, based on our most
recent model research, the U.S. economy still faces the threat of stagflation.
In addition, U.S. equities remain significantly overvalued by our measures.
Other factors weighing negatively on the attractiveness of U.S. equities
include continued flattening of the U.S. Treasury yield curve, widening of
credit spreads in the corporate bond market and elevated risk of more per-
sistent inflationary pressure in the U.S. economy.
▶ European Equities: European equities rallied along with the U.S. equity
market in July. However, Europe continues to face a plethora of challenges
for the remainder of 2022, including serious inflationary pressure, widen-
ing credit spreads and negative investor psychology. In July, the European
Central Bank (the ECB) raised its key interest rate by 50 basis points, the
first increase in 11 years and the biggest since 2000, as it confronts surg-
ing inflation, even as the risk of recession in Europe mounts. Moreover,
inflationary pressure in Europe continues to be exacerbated by Russia’s
invasion of Ukraine.
▶ Japanese Equities: Our model research continues to find Japanese eq-
uities unattractive due to an inverted and flattening yield curve measure,
widening credit spreads and negative investor psychology.
(continued on next page)
August 2022

View From the EDGE®

Threat of Stagflation Persists

▶ Chinese Equities: Chinese equities are undervalued by our measure. China’s draconian zero-COVID restrictions
continue to harm its economic growth prospects, the outlook for the Yuan and investor psychology. Credit spreads
continue to widen in the Chinese financial markets.

▶ Indian Equities: Investors may be bracing for further tightening by the Reserve Bank of India after a surprise rate hike
in May, followed by another in June to combat elevated inflation. Indian equities are also in a behavioral correction
stage that continues to offset their relatively favorable economic growth prospects. A shift to more positive investor
psychology alongside relief from inflationary pressures would likely help shift the outlook more positively.

Fixed Income:
▶ The bond market rallied during July (yields declined and prices increased). The yield on the 10-year U.S. Treasury
fell to 2.57% in July after reaching almost 3.5% earlier in the year. The strength of the U.S. dollar against a basket of
the world’s major currencies is playing an important role in making U.S. Treasuries relatively attractive. Our research
continues to favor U.S. Treasury Inflation-Protected Securities (TIPS) and U.S. Treasury Floating Rate Securities, which
may perform well in an inflationary or stagflationary environment.

▶ The outlook for credit remains negative as the risk of a global economic slowdown from rising inflation and monetary
tightening continues. Our research indicates an increased threat of continued widening of credit spreads in the corporate
bond market.

Real Assets:
▶ Gold: A positively sloped yield curve in the U.S. and the potential for real yields to stabilize (nominal yields less infla-
tion expectations) positively affect the outlook for gold. (Note that our measure of yield curve incorporates a “shadow
rate” reflecting the expansion of the Fed balance sheet). However, continued monetary tightening by the Fed tends to
strengthen the U.S. Dollar, which is negative for gold in the shorter term. The outlook for gold, therefore, remains mixed.
If the Federal Reserve moderates or abandons its tightening of monetary policy, gold could benefit.

▶ Commodities: Our model research has a mixed outlook for commodities. Some positive factors include narrowing high
yield credit spreads, favorable valuations, and positive investor psychology. While still undervalued relative to equities,
shorter-term concerns regarding widening credit spreads globally along with China’s slowdown have reduced the out-
look for commodities. At the same time, due to Russia’s ongoing invasion of Ukraine, the potential for food and energy

For more information about 3EDGE Asset Management or our offerings, please visit our website at 3edgeam.com.
Sources for market data/statistics: Bloomberg, Bureau of Economic Analysis

DISCLOSURES: This commentary and analysis is intended for information purposes only and is as of August 5, 2022. This commentary does not constitute an offer to sell or solicitation of an offer to buy any secu-
rities. The opinions expressed in View From the EDGE® are those of Mr. Folts and Mr. Biegeleisen and are subject to change without notice in reaction to shifting market conditions. This commentary is not intended
to provide personal investment advice and does not take into account the unique investment objectives and financial situation of the reader. Investors should only seek investment advice from their individual finan-
cial adviser. These observations include information from sources 3EDGE believes to be reliable, but the accuracy of such information cannot be guaranteed. Investments including common stocks, fixed income,
commodities, ETNs and ETFs involve the risk of loss that investors should be prepared to bear. Investment in the 3EDGE investment strategies entails substantial risks and there can be no assurance that the
strategies’ investment objectives will be achieved. The regions included in our Equities category are measured based on the S&P 500 and MSCI indices. U.S. equity markets are represented by the S&P 500 index,
unless we state otherwise. Japanese equities are represented by the Nikkei 225 equity index. European equities are represented by the MSCI Europe Index. India equities are represented by the S&P BSE SEN-
SEX equity index, and Chinese equities are represented by the MSCI China index. Real Assets (Gold & Commodities) includes precious metals such as gold as well as investments that operate and derive much of
their revenue in real assets, e.g., MLPs, metals and mining corporations, etc. Intermediate-Term Fixed Income includes fixed income funds with an average duration of greater than 2 years and less than 10 years.
Short-Term Fixed Income and Cash includes cash, cash equivalents, money market funds, and fixed income funds with an average duration of 2 years or less. Past performance is not indicative of future results.
View From the EDGE® is a registered trademark of 3EDGE Asset Management, LP.

3EDGE Asset Management, 303 Congress Street Suite 501, Boston, MA 02210
T 844.903.3343 W 3edgeam.com
3EDGE Solutions Designed to Smooth the Ride
Seeking to manage volatility and downside risk while providing the potential to be additive to investment returns

3EDGE Strategies Potential Use Case

Tactical Multi-Asset Core Solutions
Conservative Strategy 1-3 yrs
Fixed Income complement or outright
Blended portfolio holding predominantly fixed replacement
income; also includes equities and real assets

Total Return Strategy >3 yrs

Blended portfolio holding a mix of Blend with existing 60/40 portfolio
equities, real assets and fixed income

ESG Strategy >3 yrs

Blend with existing 60/40 portfolio with
Blended portfolio holding a mix of equities, real ESG focused ETFs
assets and fixed income with ESG focused ETFs

ESG Aggressive Strategy >10 yrs

Blended portfolio with potential for high equity Equity complement or outright replace-
holdings; includes real assets and fixed income with ment utilizing ESG focused ETFs
ESG focused ETFs
Growth Strategy >10 yrs
Blended portfolio with potential for high equity Equity complement or outright
holdings; also includes real assets and fixed income replacement

Tactical Multi-Asset Income Solution

Income Plus Strategy >3 yrs
Income replacement strategy targeting
Blended portfolio of traditional equity income and a 4% yield with emphasis on minimizing
fixed income sources as well as non-traditional drawdowns
sources of income

Tactical All Equity Solution

Global Equity Strategy >10 yrs
Global equity complement or outright
Globally diversified equity portfolio with tactical
replacement of ACWI holding
shifts between geography and market capitalization

Tactical Crypto Solution

Crypto Plus Strategy >10 yrs
Disciplined approach to investing in crypto currency Alternative store of value
sources of income

Tactical Long/Short Solutions

Systematic Strategy >10 yrs
Pure quantitative representation of 3EDGE model; Pure representation of model research
uses derivatives to hedge exposure

Dynamic Strategy >10 yrs

Human and Machine inputs for
Quantitative and qualitative; uses derivatives to allocations
hedge exposure

Long/Short strategies are not suitable for all investors since they have the potential for heightened volatility and significant loss. They may use derivatives to hedge their investments or to seek
to enhance returns. Derivatives entail risks relating to liquidity, leverage and credit that may reduce returns and increase volatility. These strategies may also engage in short selling. Selling
securities short could result in losses significantly higher than the original investment. Because there is no limit on how much a security’s price may rise, securities sold short are subject to an
unlimited risk of loss.

3EDGE Asset Management, 303 Congress Street, Suite 501, Boston, MA 02210
T 844.903.3343 W 3edgeam.com