Main Idea:
The market continues to conflate Trump’s tariffs news with the macro regime. The market volatility and positioning unwind indicate this tension. When these moving parts are understood correctly, the risk reward and scenario analysis is clear.
Macro Tear Sheets:
The Macro Tear Sheets continue to track these developments and there are several key insights to take note of.
First, the forward curve is now pricing 42.5bps of cuts by the end of this year.
The implication of this is that we are unlikely to price MORE cuts until inflation expectations fall. Short-term inflation expectations spiked today but 10 year inflation swaps (blue) didn’t rally as much.
This move in inflation swaps has overlapped with the curve bull flattening:
The bull flattening is into short term inflation expectations rising and low credit spreads is WHY gold and silver have rallied so much:
These incremental signals and correlations in the macro regime directly connect to the range ES has been in since November of 2024. Positioning unwinds have occurred to the upside AND downside since November. These positioning changes and their interaction with the macro regime explain the WHY behind moves which in turn explain WHERE we are likely to go over the next 90 days.
