Macro Regime Tracker: FOMC Moment
Macro regime and risk assets qualified clear
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, AI, and cross-asset data, it identifies macro changes and their impact on market positioning.
Macro Regime Tracker Index:
The macro regime continues to show strength as equities melt up. This is the theme I have consistently laid out since April. The recent video I did on the credit cycle explained that the Fed is cutting rates into accelerating growth.
As the Fed cuts rates into grwoth, we are seeing the Mag7 names get A TON of capital as market breadth is fairly neutral. In simple terms, the rally in the S&P500 is being driven by Mag7 while everything else just sits there. The macro clearing event tomorrow could cause some short term selling pressure, but this would be another buying opportunity in my view.
As always, all the systematic models and strategies are laid out below. My views on rates are laid out here as we move into tomorrow. Thanks.
Main Developments In Macro
US Policy, Government, and Fiscal
HOUSE SPEAKER MIKE JOHNSON TALKS TO REPORTERS
JOHNSON: I DON’T SEE A PATH FOR TRUMP THIRD TERM
JOHNSON SUGGESTS NO WAY TO AVOID FOOD STAMPS CLIFF ON NOV. 1
US VICE PRESIDENT JD VANCE SPEAKS TO REPORTERS AT THE CAPITOL
VANCE: TRYING TO MAKE SURE CRITICAL FOOD BENEFITS GET OUT
VANCE: WE CAN’T KEEP PAYING ALL FEDERAL WORKERS, FUNDS LIMITED
VANCE: THINK PEACE IN MIDEAST WILL HOLD DESPITE SKIRMISHES
THUNE: TRUMP WILLING TO MEET DEMS NEXT WEEK IF SHUTDOWN ENDS
JEFFRIES SAYS DEMOCRATS REMAIN FIRM IN POSITION ON STOPGAP BILL
FHFA’S PULTE: NEWS INCOMING SHORTLY ON FANNIE MAE
DOZENS OF STATES SUE TRUMP ADMIN OVER FOOD STAMP CUTS: NYT
Geopolitical & Global Risk
HAMAS CALLS ON MEDIATORS TO PRESSURE ISRAEL TO STOP VIOLATIONS
HAMAS REITERATES COMMITMENT TO GAZA CEASEFIRE AGREEMENT
HAMAS SAYS IT HAS NOTHING TO DO WITH RAFAH SHOOTING
NETANYAHU ORDERS IDF TO CARRY OUT ‘POWERFUL’ GAZA STRIKES
KATZ: HAMAS TO PAY HEAVY PRICE FOR ATTACKING IDF SOLDIERS
RUSSIAN, SYRIAN DEFENSE MINISTERS DISCUSS COOPERATION
VENEZUELA DECLARES TRINIDAD’S PRIME MINISTER PERSONA NON GRATA
MEXICO’S SHEINBAUM: US BOATS ATTACK WAS IN INTERNATIONAL WATERS
SHEINBAUM: MEXICO AGAINST US BOAT ATTACK IN INTERNATIONAL WATER
SHEINBAUM: MEXICAN NAVY HELPED RESCUE SURVIVOR AFTER US ATTACK
US–China / Tech–Industrial Policy Interface
NVIDIA CEO SAYS US STILL AHEAD OF CHINA IN AI
NVIDIA CEO SAYS POSSIBLE THAT US COULD FALL BEHIND CHINA IN AI
NVIDIA HASN’T SOUGHT LICENSE TO SHIP BLACKWELL TO CHINA: HUANG
HUANG SAYS UNSURE ABOUT STATUS OF LICENSES FOR SAUDI ARABIA
HUANG SAYS HE ASSUMES CHINA MARKET TO REMAIN AT ZERO FOR NVIDIA
HUANG SAYS HE’S CONFIDENT TRUMP WILL REACH GOOD DEAL W/ CHINA
HUANG: US NEEDS A LOT MORE ENERGY TO SUSTAIN INDUSTRY GROWTH
HUANG SAYS `I DON’T BELIEVE WE’RE IN AN AI BUBBLE’
US ENERGY DEPARTMENT RELEASES STATEMENT ON SUPERCOMPUTERS
US SELECTS HPE, NVIDIA AS PARTNERS FOR 2 NEW SUPERCOMPUTERS
NVIDIA TO HELP BUILD SEVEN SUPERCOMPUTERS WITH US ENERGY DEPT
SUPERMICRO, NVIDIA EXPAND GOVERNMENT SOLUTIONS PARTNERSHIP
SUPERMICRO EXPANDS COLLABORATION WITH NVIDIA
NVIDIA, NOKIA IN NEW PARTNERSHIP
NVIDIA TO MAKE $1.0B EQUITY INVESTMENT IN NOKIA
Nvidia, Nokia: T-Mobile U.S. 6G Trials Expected to Start in 2026
Nvidia, Nokia: T-Mobile U.S. Working to Integrate AI-RAN Technologies Into 6G Development Program
NVIDIA CEO SAYS BLACKWELL IN ‘FULL PRODUCTION’ IN ARIZONA
Nvidia CEO Huang at GTC: Nvidia Partners with Uber to Connect ‘Robo-Taxi Ready’ Computing Platform
Nvidia: Palantir Integrating Nvidia Accelerated Computing Into Ontology Framework
Nvidia: Lowe’s Pioneering Operational AI for Supply-Chain Logistics With Palantir, Nvidia
Macro Tear Sheets: Equities, Stock/Bond Correlation, Fixed Income, FX, Crypto, and Commodities
Macro Regime Dashboard: Excel spreadsheet for economic data,
Momentum and Mean Reversion Models: Equities, Commodities, Fixed Income, and Currencies
You can find the educational primer and video explanation of these models here: LINK
Growth, Inflation, Fixed Income, Credit, and Equities Regime Tracker
The Macro Regime Model offers a real-time view of growth, inflation, and yield curve dynamics, integrating these with credit market shifts, equity risk premiums, and positioning data. It connects upcoming catalysts to statistical drivers of asset prices, creating a unified framework that quantifies skew and clarifies risk-reward across asset classes.
Key Points To Set The Context:
US Market Wrap: Tech Offsets Weak Breadth Ahead of Fed; Index Flat (S&P −0.02%)
Markets traded sideways into Wednesday’s Fed decision and a critical stretch of megacap tech earnings. The S&P 500 ended marginally lower (−0.02%), masking a sharp dispersion beneath the surface: Tech strength kept the tape afloat, while defensives and interest-sensitive sectors extended declines. Liquidity stayed ample and rates were contained, but breadth deteriorated again, nearly 400 stocks fell on the day.
Sector Attribution
Weighted Return Contribution (Index −0.02%)
Leaders: Info Tech (+0.23%), Cons Discretionary (+0.05%), Materials (+0.01%)
Drags: Financials (−0.09%), Health Care (−0.05%), Industrials (−0.06%), Real Estate (−0.03%), Comm Services (−0.04%), Utilities (−0.04%), Staples (−0.02%), Energy (−0.02%)
Unweighted Performance (Breadth)
Leaders: Info Tech (+0.65%), Materials (+0.63%), Cons Discretionary (+0.47%)
Laggards: Utilities (−1.53%), Real Estate (−1.39%), Industrials (−0.80%), Energy (−0.68%), Financials (−0.68%), Health Care (−0.61%), Staples (−0.46%), Comm Services (−0.41%)
The index stayed near record highs thanks entirely to Tech’s +0.23 pp contribution, masking broad underperformance elsewhere. Weakness clustered in rate-sensitive groups (Utilities, REITs, Financials) as investors trimmed duration exposure ahead of the FOMC. Cyclicals like Materials and Discretionary held up modestly, consistent with resilient growth expectations.
Macro Overlay
Fed and Policy Context
The market is marking time before Wednesday’s expected quarter-point rate cut. Futures imply high confidence in the move but little clarity on the guidance, most expect Powell to keep optionality open on ending quantitative tightening. A calm front end and contained term premium continue to support valuations, but the weaker sector breadth shows some unease about follow-through beyond Tech.
AI & Earnings Focus
Five megacaps; MSFT, GOOGL, META, AMZN, AAPL all report within 48 hours. Nvidia’s +5% gain and suppliers’ blowout prints (SK Hynix +4%, Advantest +20%) reinforced the “AI-supercycle” theme, while expectations remain elevated: the Magnificent 7 are projected to post +14% profit growth versus +8% for the broader S&P. The test now is whether guidance sustains that gap.
Macro Backdrop
Consumer confidence fell for a third month (Conference Board 94.6), underscoring a softer household outlook even as spending stays firm. Oil held near $60 and gold bounced modestly, while the USD drifted lower for a third session. The 10-yr yield was steady at 3.98%. Trump’s Asia trip, featuring talk of tariff relief and a prospective US-China tech-cooperation deal, added a mild geopolitical tailwind.
The Read-Through
1. Narrow leadership: The rally’s dependency on Tech is deepening, breadth deterioration despite record-high prints signals fragility beneath the index.
2. Rates pause helps valuation, not participation: Stable yields are supporting multiples, but rate-sensitive sectors remain sellers’ territory.
3. Growth narrative intact: Cyclicals’ relative resilience and commodity stability suggest no sharp downgrade to the macro growth view yet.
What I’m Watching
FOMC tone: Whether Powell signals a pause in QT or a dovish bias beyond this cut.
Megacap guidance: Cloud, AI-infrastructure, and capex commentary, do they validate current leadership?
Breadth check: Does participation rebound if the Fed confirms a soft-landing stance?
A flat index that hides a hollow advance, Tech’s strength offset broad sector weakness. Markets are holding steady into the dual catalysts of Fed guidance and Big Tech earnings. The next move hinges on whether policy reassurance and profit momentum can reignite breadth or whether leadership concentration tightens further.
US IG Credit Wrap: Fed in Focus, Spreads Steady; Carry Still the Core Story (IG OAS ≈50.7 bp)
Investment-grade credit remains locked in a remarkably tight range, with the Bloomberg US IG OAS holding near 50.7 bp, barely changed on the week. The stability underscores just how anchored credit risk has become in a market balancing strong liquidity, contained volatility, and an improving macro narrative into the Fed’s expected quarter-point rate cut.
Where We Sit (from today’s chart)
IG OAS: ~50.7 bp (last 50.74)
5-yr avg: ~61.9 bp → ~11 bp inside
Cycle tights: ~46.1 bp → ~4–5 bp above
2022 wides: ~111.2 bp → ~60 bp tighter
The OAS sits comfortably in its lower quartile of the 5-year range, reflecting normalized liquidity and well-anchored risk appetite. Despite cross-asset rotation under the surface, rate-sensitives soft, Tech still dominant, credit spreads show zero sign of strain. Carry remains the defining theme: slow grind, low vol, and asymmetric upside to holding risk.
Macro & Tape Overlay
Fed and Macro:
Markets are coiled ahead of Wednesday’s FOMC, where a 25 bp rate cut is fully priced. The debate has shifted to guidance, whether Powell hints at an end to quantitative tightening. A dovish-leaning communication would reinforce the current “liquidity cushion” narrative, key to maintaining tight credit spreads.
Equities:
The S&P 500 closed −0.02%, masking weak breadth as rate-sensitives (Utilities, REITs, Financials) lagged while Tech stayed strong. The leadership concentration in megacaps hasn’t disturbed credit yet; balance-sheet quality in those names keeps IG confidence high.
Rates/FX:
The 10-yr UST yield held near 3.98%, with the front end steady (~3.50%), preserving the curve’s shallow slope. Dollar drifted modestly lower for a third session, and gold regained footing after a three-day pullback.
Commodities:
WTI around $60 after a three-day slide; stable energy prices remove inflation anxiety and support the Fed’s latitude to cut. Oil’s round-trip from mid-60s to low-60s helped Energy credit remain resilient, no sectoral spread contagion.
Global Tone:
Asia firmed on AI optimism ahead of megacap earnings (MSFT, GOOGL, META, AMZN, AAPL). Trump’s Asia tour, including tariff-reduction hints and US-China tech cooperation headlines, further underpinned the global risk tone.
Mapping to IG Credit
Fair value remains 50–55 bp, representing “carry equilibrium.” Absent a rates shock or policy misstep, the 40s remain a plausible target range by year-end.
Risk Markers to Watch
Fed tone: A cut without QT clarity could nudge spreads wider, but liquidity remains abundant.
Oil path: Sustained <$60 could tighten Energy spreads; a sharp reversal above $70 might test cyclicals.
Equity breadth: Continued narrow leadership without stress in credit = late-cycle melt-up, not fragility.
Systemic tell: Only a decisive break above 60 bp OAS would flag a regime shift; still a low-probability tail.
Bottom Line
Credit’s calm persists, spreads are steady, carry is king, and liquidity is ample.
Even as equities wobble under sector rotation and macro data show mild consumer fatigue, US IG remains the anchor of cross-asset stability. With the Fed expected to reinforce a patient, liquidity-friendly stance, expect OAS to hover near 50 bp and grind tighter on dips, a quiet affirmation that the credit market still believes in the soft-landing narrative.
Mag7 Model:
See the intro published for how to use the Mag7 models here: Link
Capital Flows Interest Rate Sensitivity Model:
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