Macro Regime Tracker: Inflation and Equity Beta
Macro regime and risk assets qualified clearly
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:
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, Inflation, Fixed Income, Credit, and Equities Regime Tracker
AI and Machine Learning Strategies - Macro Regime and Positioning Premiums Strategies: S&P 500, 2-Year Interest Rates, Gold, and Bitcoin
Macro Regime Context:
I want to cover several ideas post-market close as we head into NFP. You can see the bond views here:
First, the selling in the index today occurred with the Russell outperforming. Why? Because TSLA and the indexation effect helped drag down ES.
Second, Russell outperforming against the Dow (green), crude, and inflation swaps have been moving in lockstep. This is a key relationship to note because if the Russell does outperform marginally from here then it is a confirmation about inflation expectations.
Third, the distribution for NFP is below. We are ending a week after the hawkish comments from Lagarde. I would not be surprised to see some hedges unwind and put a bottom in BTC since it has been deviating from equities on a short-term basis.
Main Developments In Macro
TESLA SHARES EXTEND DROP TO 10% AFTER TRUMP, MUSK TRADE ATTACKS
SCHMID: TARIFFS LIKELY TO DRIVE UP PRICES, UNCLEAR HOW MUCH
SCHMID: OPTIMISTIC THAT ECONOMIC ACTIVITY CAN BE SUSTAINED
SCHMID: POLICY NEEDS TO BE NIMBLE AS FED BALANCES DUAL MANDATE
KANSAS CITY FED PRESIDENT JEFF SCHMID COMMENTS IN SPEECH
HARKER: MUST WAIT FOR MORE DETAIL OF TARIFF IMPACT ON ECONOMY
HARKER GIVES LAST PUBLIC REMARKS AS PHILADELPHIA FED PRESIDENT
FED'S SCHMID: INFLATION, EMPLOYMENT DATA ARE CLOSE TO MANDATE
HARKER: POSSIBLE, NOT CERTAIN FED TO FACE HIGHER PRICES, UNEMP.
HARKER: CRITICAL MONETARY POLICY BE FREE OF EXTERNAL INFLUENCE
HARKER: US ECONOMY REMAINS RESILIENT, BUT SEE SOME STRESSORS
LUTNICK TESTIMONY TO HOUSE PANEL ENDS
KUGLER: MAJ. OF FED OFFICIALS WORRIED ABOUT INF. BEFORE GROWTH
KUGLER: PREMATURE TO EXPECT BIG JOB LOSSES FROM AI
KUGLER: IMMIGRATION FLOWS DOWN, MAY MAKE LABOR MARKET TIGHTER
KUGLER: UNEMPLOYMENT STILL AT HISTORICALLY VERY LOW RATE
KUGLER: OVERALL TAX BILL MORE STIMULATIVE THAN CONTRACTIONARY
LUTNICK REITERATES JULY 9 DEADLINE FOR TRADE DEALS
LUTNICK: EXPECT NO TARIFFS ON THINGS WE CAN'T MAKE IN US
KUGLER: NOT CLEAR TARIFFS WILL HAVE ONE-TIME INFLATION IMPACT
FED'S KUGLER SAYS HER FOCUS NOW IS ON INFLATION
FED GOVERNOR ADRIANA KUGLER COMMENTS IN Q&A FOLLOWING SPEECH
TRUMP: CONGRESS WAITING FOR ME TO DECIDE ON RUSSIA SANCTIONS
TRUMP: HAVEN'T LOOKED AT RUSSIA SANCTIONS BILL
TRUMP PRAISES MODI, SAYS TRADE DEAL IN WORKS
TRUMP: PUTIN TOLD ME RUSSIA HAS NO CHOICE BUT TO ATTACK
TRUMP: THERE'S MORE FIGHTING IN STORE IN RUSSIA-UKRAINE WAR
TRUMP: COULD BE TOUGH ON BOTH RUSSIA AND UKRAINE IF DEAL FAILS
TRUMP: IF DEAL WITH RUSSIA FAILS, WE'LL BE VERY TOUGH
TRUMP SAYS MUSK HANGUP ON BILL ONLY BECAUSE OF EV TAX CREDITS
TRUMP: 'ALL OF A SUDDEN' MUSK HAD A PROBLEM WITH TAX BILL
TRUMP: DISAPPOINTED BECAUSE MUSK KNEW INNER WORKINGS OF BILL
TRUMP: YOU DON'T WANT TO HAVE ZERO INFLATION
TRUMP: WE HAVE ALMOST PERFECT INFLATION
KUGLER: SEE INFL. RISKS NOW, EMPLOYMENT RISKS DOWN THE ROAD
KUGLER: IF HIGH TARIFFS STAY, MAY SEE LARGER INF. EFFECTS SOON
KUGLER: CURRENT POLICY WELL-POSITIONED FOR ECONOMIC CHANGES
TRUMP ON MUSK REACTION TO BILL: I WAS VERY SURPRISED
TRUMP: I'D RATHER ELON CRITICIZE ME THAN THE BILL
TRUMP SAYS HE WILL BE GOING TO CHINA
TRUMP: WILL DISCUSS POTENTIAL EU TRADE DEAL WITH MERZ
LUTNICK: NEED TO RETHINK US-MEXICO RELATIONSHIP
LUTNICK: MEXICO SHOULD BE IN MINING, REFINING BUSINESSES
GOLDMAN NOW SEES FINAL ECB CUT IN SEPTEMBER RATHER THAN JULY
TRUMP REITERATES CALL WITH XI WENT 'VERY WELL'
TRUMP SPEAKS AT THE WHITE HOUSE AS HE GREETS GERMANY'S MERZ
LUTNICK: TRUMP WANTS FULL CHIP SUPPLY CHAIN IN THE US
TRUMP CRITICIZES CBO FOR NOT STATING TARIFF CALCULATION SOONER
LUTNICK REITERATES DESIRE FOR WEATHER CLOUD INFRASTRUCTURE
XI SAYS US SHOULD DEAL WITH TAIWAN CAUTIOUSLY: CCTV
XI TELLS TRUMP US SHOULD REMOVE 'NEGATIVE' MEASURES ON CHINA
XI SAYS TRUMP IS WELCOME TO VISIT CHINA AGAIN: XINHUA
XI TELLS TRUMP CHINA IMPLEMENTED GENEVA AGREEMENT: CCTV
XI SAYS US SHOULD REMOVE 'NEGATIVE' MEASURES ON CHINA: CCTV
Macro Tear Sheets: Equities, Stock/Bond Correlation, Fixed Income, FX, Crypto, and Commodities
Macro Regime Dashboard: Excel spreadsheet for economic data, interest rates, and real estate.
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
Here is a summary of all models and their directional strengths:
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:
S&P 500 Declines -0.81%, Led by Technology and Consumer Discretionary Amid Trump-Musk Dispute and Economic Caution
Sector-by-Sector Contribution Snapshot (Weighted Impact)
Information Technology (-0.31 pp) – Largest negative contributor, significantly impacted by a steep decline in Tesla shares (-14%), following intensified disputes between Trump and Elon Musk over subsidies and tax policies.
Consumer Discretionary (-0.24 pp) – Major drag due to heightened investor caution around consumer spending amid tariff uncertainty and declining consumer sentiment.
Consumer Staples (-0.06 pp) – Modest negative contribution, reflecting cautious market sentiment despite the sector’s traditionally defensive stance.
Financials (-0.06 pp) – Negatively impacted by falling bond yields and rising economic uncertainties following softer employment data and tariff-induced inflation concerns.
Communication Services (-0.05 pp) – Contributed negatively, despite earlier strength, weighed down by general market anxiety and tariff-related uncertainties.
Industrials (-0.03 pp) – Mildly negative impact, as investors reacted cautiously to weaker manufacturing data and ongoing tariff disruptions.
Energy (-0.02 pp) – Slight negative contributor, pressured by concerns over global economic growth and uncertain energy demand outlook.
Materials (-0.02 pp) – Marginally negative, impacted by tariff concerns and ongoing economic uncertainty despite stable commodity prices.
Real Estate (-0.00 pp) – Virtually flat, as yield-oriented appeal was offset by broader market caution and interest rate uncertainty.
Utilities (-0.00 pp) – Minimal impact, despite typically defensive positioning, as investors showed broad caution amid uncertain economic conditions.
Health Care (-0.02 pp) – Slight negative impact, reflecting modest investor caution amid mixed economic signals and trade tensions.
Sector-by-Sector Performance Snapshot (Unweighted Returns)
Energy (-0.29%) – Negative returns due to ongoing worries about global economic growth prospects.
Consumer Discretionary (-0.24%) – Weakened significantly, affected by concerns around consumer spending amid intensified tariff uncertainties and broader economic caution.
Consumer Staples (-0.06%) – Slightly lower, reflecting cautious investor sentiment despite the sector's defensive attributes.
Financials (-0.06%) – Dragged down by declining yields and economic growth concerns heightened by tariff impacts.
Health Care (-0.02%) – Modestly negative, influenced by cautious investor positioning.
Industrials (-0.03%) – Slightly weaker amid manufacturing softness and ongoing tariff-related supply chain issues.
Information Technology (-0.31%) – Significantly lower, driven by Tesla's sharp drop amid Musk-Trump tensions and broader tech caution.
Materials (-0.02%) – Marginal decline as investors navigated tariff uncertainty and moderate commodity outlook.
Real Estate (-0.00%) – Flat performance as investor caution balanced against yield attractiveness.
Communication Services (-0.05%) – Modest decline, reflecting broader market anxiety despite earlier defensive interest.
Utilities (-0.00%) – Unchanged, despite investor rotation typically benefiting defensive sectors.
Macro Overlay
The S&P 500 declined -0.81%, heavily influenced by significant weakness in Information Technology—particularly Tesla, following a high-profile dispute between Trump and Musk. Concurrently, broader market sentiment deteriorated amid weaker-than-expected employment data, rising unemployment claims, and escalating tariff-related inflation concerns highlighted by Fed officials including Adriana Kugler and Jeff Schmid. These developments fueled speculation about potential Fed rate cuts, intensifying caution in markets.
Bottom Line
The S&P 500 experienced a pronounced drop of -0.81%, primarily pressured by sharp declines in Technology and Consumer Discretionary sectors amidst heightened political tensions, weak economic indicators, and escalating tariff uncertainty. Wise to maintain vigilant regarding upcoming economic data releases, Federal Reserve signals, and developments in trade policy, preparing for continued market volatility.
US IG Credit Wrap — Spreads Widen to 55.66 bp Amid Rising Economic Concerns and Tariff Impacts
Current Spread: 55.66 bp (▲ ~0.5 bp d/d), marking a modest increase in spreads. Though still below the 5-year historical average (~63 bp), the current widening reflects increasing investor caution in response to recent disappointing economic data and heightened tariff-related uncertainties.
Credit Context
< 60 bp: Stable, duration-friendly range supporting insurance and liability-driven investment (LDI) strategies.
60–70 bp: Neutral-to-cautious positioning recommended amid tariff uncertainties and macroeconomic volatility.
> 90 bp: Significant market distress—currently unlikely without a major escalation in geopolitical or macroeconomic shocks.
Macro Overlay
Today's modest widening in IG credit spreads to 55.66 bp aligns with increased market caution stemming from recent soft economic indicators, sentiment has been negatively impacted by elevated uncertainty surrounding tariffs, reinforced by cautious commentary from Federal Reserve officials including Governor Adriana Kugler and Kansas City Fed President Jeff Schmid, who underscored inflation risks and potential economic drag from persistent tariffs.
Treasury yields declined amid these concerns, bolstering market expectations of potential rate cuts by the Federal Reserve later this year, somewhat tempering broader credit market risks.
Markets remain cautiously optimistic about further trade negotiations between President Trump and Chinese President Xi Jinping but continue to closely monitor developments for any tangible resolutions.
Bottom Line
US IG credit spreads have widened slightly to 55.66 bp, underscoring increased investor caution amid weakening economic data and ongoing tariff uncertainties. Keep a good eye on upcoming economic releases, Federal Reserve communications, and developments in trade talks to inform positioning and risk management strategies.
Mag7 Model:
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