Macro Regime Tracker: Downside for equities?
Macro regime and risk assets qualified clearly
Macro Regime Tracker:
The Macro Regime Tracker offers a daily lens on how shifts in growth, inflation, and liquidity affect short-term risk and reward. Leveraging machine learning and cross-asset data, it identifies macro changes and their impact on market positioning.
The launch video for the Macro Regime Tracker is here: Link
Macro Regime Tracker Index:
Macro Regime Context
Macro Tear Sheets: Equities, Fixed Income, FX, Crypto, and Commodities
Macro Regime Dashboard: Excel spreadsheet for economic data and interest rates
Growth and Inflation Regime Tracker
Fixed Income and Credit Model
Equity Sector Model
Machine Learning Strategies and Models
Macro Regime Context:
I want to cover a very important idea for equities and that is the indexation effect for the S&P500. A subscriber asked if I could expand on this, and I want to explain WHY this is one of the most important elements to understand for trading ES. The chart below is the weighted average return for the S&P 500 index. In other words, how much is each sector contributing to the moves we see in the spot index? You will notice that tech has consistently been the sector that has been the source of explosive moves in ES to the upside AND downside:
Why is this? It is because the technology sector (green line in the chart below) has a 30% weighting in the entire index. This means if this sector moves, the index will move MORE than if one of the other sectors moves the same amount.
On top of this, the top 10 stocks have an incredibly large weighting. People don’t realize their entire retirement is heavily dependent on 10 companies in the index. Everyone loves the ride up, but it becomes a nightmare on the way down.
All of the companies with over a trillion-dollar market cap are down YTD except Berkshire (functionally cash), and Meta is barely skating by with a positive return.
We are most certainly not out of the woods yet and need to see significant momentum to the upside and changes in the fundamentals for a race to all-time highs. Broadly speaking, we just saw one of the most significant volatility crashes in years and ES has barely rallied.
All of us know there are risks brewing under the surface, and I have consistently laid this out in the macro reports.
Comprehensive Macro Report: Geopolitics, The Risk In China, and The Carry Trade Unwind
The Monthly Macro Economic Report Is Below:
I am going to cover this further with the ES model at the end of this report.
Main Developments In Macro Today:
*TRUMP PREPARES AUTO TARIFF ANNOUNCEMENT AS SOON AS WEDNESDAY
*FED'S MUSALEM STILL SEES INFLATION, GROWTH RISKS AS BALANCED
*MUSALEM: NET EFFECT OF TRUMP POLICIES STILL UNCERTAIN
*FED'S MUSALEM SEES NO URGENCY TO LOWER INTEREST RATES
*UK BUFFER AGAINST SPENDING RULE £9.9B, PREVIOUSLY £9.9B
Macro Tear Sheets: Equities, Fixed Income, FX, Crypto, and Commodities
Macro Regime Dashboard: Excel spreadsheet for economic data and interest rates
Growth and Inflation Regime Tracker:
The Macro Regime Model first provides a real-time view of growth and inflation dynamics, then directly connects these insights to upcoming catalysts and the statistical measures that gauge their impact on asset prices.
(If you are new and would like to do a free trial to review the full macro regime tracker with the connected ES strategy, a link to a free trial is available here: Link).
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