Macro Regime Tracker: Equities moving up OR down?
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:
The structural changes that are taking place in AI will always incrementally reveal themselves in price action.
As Soros lays out in his book on reflexivity, the market will always test the underlying trend. When we decompose this logic into the actual drivers of markets, we know that positioning is oversold, and there are some macro risks. We have yet to make a durable bottom in equities, but this could change at any time.
As I have consistently laid out in the trade write-ups and alpha reports, we are unlikely to price more than 75bps in Z5, which means the forward curve is unlikely to price the Fed cutting more than 75bps between now and the next FOMC meeting. We saw this tangibly take place as the Z5 SOFR contract retraced from its intraday high at the same time ES rallied from its low:
I explained the logic behind these flows as they connect to EURUSD in this report:
I am NOT overly concerned about the structural dynamics in the macro regime right now. There is going to be significant volatility and rotations, but we are not seeing the type of evidence that would elicit a structure deleveraging. Mapping the incremental changes in the macro regime as they connect to positioning is THE goal in this regime. However, you don’t want to let this short term goal distract you from recognizing that credit is still flowing to the US economy and AI is shifting productivity and consumption patterns in a manner that could turn out to be greater than COVID-19.
Much of this risk has concentrated in the Mag7 names as the carry trade unwinds which is why implied correlation has remained elevated. As long as implied correlation remains elevated, equal weight SPX will outperform the index (RSP/SPY ratio)
Main Developments In Macro
Trump to Announce Tariffs at Rose Garden Event April 2
*TRUMP: RELATIVELY SPEAKING ON TARIFFS, WE'LL BE VERY KIND
*TRUMP ON TARIFFS: YOU'RE GOING TO SEE IN TWO DAYS
*WILLIAMS: CURRENT LEVEL OF RATES IS REALLY WELL POSITIONED
*WILLIAMS: WANT TO WATCH DATA TO SEE IMPACT OF TARIFFS ON PRICES
*FED'S WILLIAMS: WE'RE READY TO SHIFT POLICY IF IT'S APPROPRIATE
*WILLIAMS: LONG-TERM INFLATION EXPECTATIONS WELL-ANCHORED TODAY
*TRUMP: TARIFFS GO ON WEDNESDAY
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).
Keep reading with a 7-day free trial
Subscribe to Capital Flows to keep reading this post and get 7 days of free access to the full post archives.