Macro Regime Tracker: How Much Downside In 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:
The most important thing I want to emphasize about today’s macro context is the difference between a rotation of capital and an actual recession in the underlying economy. When we look at US equities, they are currently in a -10% drawdown but one of the primary drivers has been a rotation into Chinese Tech and European banks. If the current pullback in equities was only from a contraction in US growth then we would see much higher credit spreads and more deterioration in issuance. I laid out these tensions in the two recent reports:
The main idea is that until we see more red flags from credit markets, a recession isn’t on the table. This means the drivers for any further downside in equities will be from the carry trade and a rotation of capital on an international basis.
This is the exact reason we saw the DAX (blue) and European financials (white) UP as US equities (orange) closed the day down. Capital has been moving OUT of the US and into Europe and China.
This is WHY yields in Germany (white) have been rallying and yields in the US remain flat:
This is also why banks like Deutsche Bank is melting up:
These ideas contextualize the charts and analysis below.
Main News Developments:
*DRAGHI: WE NEED DEFENSE TO DEVELOP ON A EUROPEAN SCALE
*ISRAEL SAYS WILL ACT WITH INCREASING INTENSITY AGAINST HAMAS
*BESSENT SAYS 'ALL OPTIONS ARE AVAILABLE' ON CHINA INVESTMENTS
*BESSENT: ON APRIL 2, EACH COUNTRY WILL GET A TARIFF NUMBER
*BESSENT: 15% OF COUNTRIES WILL MAKE UP BULK OF TARIFFS
*BESSENT: UNDERLYING ECONOMY IS 'HEALTHY'
*CANADA INFLATION QUICKENED TO 2.6% Y/Y IN FEB, EST. 2.2%
*GERMAN LAWMAKERS BACK LANDMARK DEFENSE SPENDING PLANS
(This is why German yields are melting up. Watching the data out of Germany will be critical because any inflation could spill over to other countries)
*PUTIN REAFFIRMED COMMITMENT TO PEACE IN UKRAINE: IFX
*NVIDIA SAYS COMPANY TRANSITIONING TO BLACKWELL ULTRA IN 2H
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.
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.