Macro sensitivities can be found in equity portfolios

There has been an explosion of research work on factor risks within equity portfolios. The go to analysis is to describe a portfolio through factor exposures like momentum, size, quality, value, or volatility to name a few; however, a key driver is still macroeconomic factors. A recent paper "Targeting Macroeconomic Exposures in Equity Portfolios: A Firm-Level Measurement Approach for Out-of-Sample Robustness" provides useful insights on macro risks that are different than factor premium and have out-of-sample robustness. 

Macroeconomic risks have a real effect on portfolio returns and can be picked up through cross sectional exposures that are sensitive to these macro exposures. While most macro exposures are gained through differences in asset class allocations, equity specific portfolio exposures can also create macro risk exposures. 

These macro exposures can be obtained through focusing on market-based proxies for macro risks which can be obtained daily and are based on the aggregate behavior of investors. The authors look at short rates, the term premium, the credit premium, and inflation breakevens as good forward estimates of key macro risks. Rates provide information on monetary policy and economic growth. The term premium is viewed as an important indicator on future growth. The credit premium provides insights on growth, and inflation breakevens tell us something about future inflation. The change in these variables can serve as a surprise estimate of expectations. 

The authors form equity portfolios that have strong positive and negative exposure to macro risks. The results show that strong macro sensitive portfolios can be formed. The table also shows that factor exposures are not sensitive macro risks.  Sector allocation exposures are also sensitive to macro risks, more so than factor portfolios. 

These macro portfolios can be formed to be either positively or negatively sensitive to macro surprises. 

Equities can be classified by their sensitivity to macro exposures that are associated with well-known market expectation data. This macro framework can allow investors to choose their desired macro sensitivity without moving exposures to other asset classes.