Macro Regime Tracker: Interest Rates and AI
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 most recent macro video and connected report can be found here:
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Main Developments In Macro
US & Federal Reserve
FED’S SCHMID SAYS INSTANT PAYMENTS PROBABLY LEAPFROG STABLECOIN
SCHMID: LABOR MARKET HAS COOLED BUT REMAINS HEALTHY
SCHMID: PRICE INCREASES BECOMING MORE WIDESPREAD
SCHMID: AGGRESSIVELY BOOSTING DEMAND RISKS BIG PRICE INCREASES
SCHMID: POLICY IN RIGHT PLACE, ONLY SLIGHTLY RESTRICTIVE
FED’S SCHMID SAYS RATES SHOULD LEAN AGAINST DEMAND GROWTH
CITADEL’S GRIFFIN SAYS US ECONOMY IS ON A BIT OF A ‘SUGAR HIGH’
US Fiscal, Policy & Political Developments
THUNE: SHUTDOWN LAYOFFS WILL BE JUDGEMENT CALL BY WHITE HOUSE
SENATE MAJORITY LEADER JOHN THUNE SPEAKS TO REPORTERS
THUNE: FATE OF ACA SUBSIDIES ‘PROBABLY’ DEPENDS ON WHITE HOUSE
LEAVITT: HAVE NOT SEEN ACA SUBSIDY PROPOSALS
LEAVITT: OMB CONTINUES TO WORK WITH AGENCIES ON LAYOFFS
JOHNSON: THE HOUSE DID ITS JOB, SENATE DEMOCRATS HAVE THE BALL
JOHNSON: THERE’S NOTHING FOR US TO NEGOTIATE ON STOPGAP FUNDING
JOHNSON: GOP HAS MANY IDEAS TO FIX HEALTH CARE IN COMING MONTHS
HOUSE SPEAKER MIKE JOHNSON TALKS TO REPORTERS ON SHUTDOWN
Trade & Geopolitics (US-Led Focus)
TRUMP: DOING SOMETHING ON FARMERS THIS WEEK
TRUMP: CARNEY WILL PROBABLY TALK ABOUT TARIFFS AT MEETING
TRUMP: MEDIUM, HEAVY DUTY TRUCKS TO FACE 25% TARIFF FROM NOV 1
TRUMP: TRUCK TARIFFS TO BEGIN NOV 1ST, 2025
TRUMP: TARIFFS ON SOME TRUCKS BEGIN NOV. 1
LEAVITT: TRADE WILL BE TOPIC OF DISCUSSION W/ TRUMP, CARNEY
LEAVITT: TECHNICAL TALKS HAPPENING IN EGYPT W/ WITKOFF, KUSHNER
TRUMP: LULA WILL COME TO US
TRUMP ON BRAZIL: WILL START DOING BUSINESS
TRUMP: WILL HAVE FURTHER TALKS WITH LULA
TRUMP: HAD A GOOD CALL WITH LULA
LULA WILLING TO TRAVEL TO THE US, BRAZIL PRESIDENCY SAYS
LULA, TRUMP AGREED TO MEET IN PERSON ‘SOON’, BRAZIL PRESIDENCY
LULA ASKED TRUMP TO REMOVE 40% TAX ON BRAZIL IMPORTS
LULA, TRUMP TALKED FOR ABOUT 30 MINUTES, BRAZIL PRESIDENCY SAYS
TRUMP, LULA CALL WAS ‘POSITIVE,’ BRAZIL’S HADDAD SAYS
HADDAD: GOVT WILL RELEASE STATEMENT ON TRUMP, LULA CALL SOON
TRUMP AND BRAZILIAN PRESIDENT LULA ARE SPEAKING NOW: REUTERS
TRUMP: REALLY GOOD CHANCE OF ISRAEL, HAMAS DEAL
PUTIN, NETANYAHU HOLD TELEPHONE CONVERSATION, KREMLIN SAYS
INDIRECT TALKS BETWEEN ISRAEL, HAMAS BEGIN IN EGYPT: ALQAHERA
Foreign Policy, Emerging Markets & US Relations
BESSENT: WILL DISCUSS THE SEVERAL OPTIONS TO SUPPORT ARGENTINA
BESSENT: WILL CONTINUE DISCUSSIONS WITH ARGENTINA’S CAPUTO
BRAZIL’S MINISTRY: - EXPORTS TO US ARE LIKELY TO KEEP FALLLING
BRAZIL’S MINISTRY: IF US TARIFFS ARE KEPT IN PLACE -
ARGENTINA SELLS DOLLARS FOR FIFTH STRAIGHT FX TRADING SESSION
Europe (Macro Relevance)
LAGARDE: STILL ANTICIPATING GROWTH IN 2H, BUT WEAKER THAN IN 1H
LAGARDE: WE ARE DATA DEPENDENT ON RATES
LAGARDE: ECB IS IN A GOOD PLACE
LAGARDE: NO CURRENCY’S GLOBAL POSITION IS GUARANTEED
LAGARDE: UNIQUE OPPORTUNITY TO STRENGTHEN EURO’S GLOBAL ROLE
LAGARDE: WAGE GROWTH TO MODERATE FURTHER
LAGARDE: INFLATION REMAINS CLOSE TO 2% TARGET
LAGARDE: HEADWINDS TO GROWTH SHOULD FADE NEXT YEAR
LAGARDE: SLUGGISH EXPORTS, STRONG EURO TO HOLD BACK ECONOMY
LANE: OUR APPROACH TO MONETARY POLICY MUST REMAIN OPEN-MINDED
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
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: Communication Services and Discretionary Lead as AI Momentum Extends (S&P +0.05%)
The S&P 500 eked out a modest gain of 0.05%, extending its winning streak to a seventh session the longest since May as an AI-fueled rally in chipmakers and megacaps offset weakness across financials and health care. The day’s tone was defined by momentum rather than breadth, with a narrow set of leaders driving index stability amid rising yields and lingering fiscal uncertainty.
Sector Attribution
Weighted Return Contribution to Index
Leaders: Communication Services (+0.14%), Consumer Discretionary (+0.05%), Utilities (+0.01%), Industrials (+0.01%)
Drags: Financials (–0.07%), Health Care (–0.04%), Info Tech (–0.02%), Real Estate (–0.02%)
Net: S&P 500 +0.05%
Sector Performance (Unweighted Breadth)
Winners: Communication Services (+1.37%), Consumer Discretionary (+0.50%), Utilities (+0.44%), Energy (+0.14%)
Losers: Financials (–0.50%), Real Estate (–0.92%), Health Care (–0.40%), Materials (–0.12%), Staples (–0.19%)
Net: S&P 500 +0.05%
Macro Overlay
AI Momentum vs. Macro Caution
Markets once again leaned into the AI narrative after AMD surged 24% on its OpenAI data-center deal, igniting another leg higher in semiconductor and cloud infrastructure names. Despite scattered bubble chatter, institutional flows suggest growing conviction that earnings season will validate valuations, particularly across the “Magnificent 7.” Citigroup and Goldman both flagged upside to consensus EPS driven by resilient consumption and capex in AI-linked sectors.
Rates & the Fed Context
Treasury yields rose modestly 10s at 4.16%, +4bp on the day with the front end also firmer as Fed speakers maintained a “measured easing” bias. St. Louis Fed’s Schmid noted policy remains “only slightly restrictive” and should continue to “lean against demand growth.” The comments reinforced the idea that cuts are conditional on data rather than pre-committed a meaningful distinction given the risk of a prolonged government data blackout.
Shutdown Still a Background Risk
Washington gridlock remains a latent volatility trigger, but traders are largely ignoring it for now. House Speaker Johnson reiterated there’s “nothing to negotiate” on stopgap funding, while Senate leadership called White House discretion on shutdown-related layoffs a “judgment call.” Despite this, risk appetite held firm, underscoring the extent to which AI optimism has overwhelmed fiscal noise.
Cross-Asset Tone
The dollar firmed (+0.3%) and long-end Treasuries underperformed globally. Gold extended toward $4,000/oz, Bitcoin hit fresh records, and oil rose 1.4% to $61.76/bbl on limited OPEC+ supply gains.
The Read-Through
The equity rally remains narrow but unrelenting powered by tech and communications leadership tied to the AI buildout while cyclicals fade under higher yields and muted macro data. With yields climbing, breadth thinning, and sentiment euphoric, the setup resembles a “momentum melt-up” phase rather than a balanced advance.
Takeaway:
The market is brushing off policy uncertainty, shutdown risk, and even modest yield pressure as AI-linked growth stories dominate narrative space. The result is a self-reinforcing cycle, optimism feeding price action feeding optimism. For now, defensives are passive passengers; communication and discretionary sectors are steering the rally.
US IG Credit Wrap: Low-50s Grind, AI Melt-Up vs. Higher Yields (IG OAS ~50.9 bp)
IG spreads stayed in the carry channel even as equities notched fresh highs on AI euphoria and Treasury yields pushed up. Bloomberg US IG OAS prints ~50.9 bp (chart last: 50.904), little changed as investors prioritize earnings momentum over macro noise.
Where we sit (from the chart)
IG OAS: ~50.9 bp
5-yr avg: ~62.4 bp → ~11–12 bp inside
Cycle tights: 43.8 bp → ~7 bp off
Pandemic wides: 151.8 bp → ~101 bp tighter
(Chart stats: Last 50.904 | High 151.798 on 03/20/20 | Avg 62.383 | Low 43.750 on 02/13/20.)
Credit Context
< 60 bp: Duration-friendly, carry-positive zone for insurers, pensions, and liability-driven buyers.
60–70 bp: Macro noise threshold, where volatility or inflation threats prompt positioning cuts.
> 90 bp: Systemic stress unlikely unless global macro or geopolitical shocks return.
Macro
Equities: AI bid intact; chips rip on AMD-OpenAI headlines; leadership narrow.
Rates: UST 10y ~4.16% (+4bp); long end underperforms.
USD / Commodities: Dollar firmer; gold near ~$4,000/oz; WTI ~+$1.4%.
Policy backdrop: Shutdown risk still a visibility issue more than a growth shock; Fed rhetoric stays data-dependent with “measured easing” optionality intact.
How this maps to credit
Carry dominates: Low-50s OAS = duration-friendly, carry-positive for LDI/insurers; beta hedges doing the work as spreads refuse to chase equities.
Correlation check: Rising reals and a firmer USD usually lean wider, but earnings strength + AI capex are offsetting keeping IG in a sideways grind rather than a re-risking.
Quality skew: OAS stability hides micro dispersion, idiosyncratic leverage/term-structure names still pay up; high-beta BBB cyclicals more sensitive to the bear-steepening risk.
The read-through
Base case remains “carry over convexity”: a sideways drift in the low-50s while equities melt up on AI and rates edge higher. Until the macro narrative breaks one way (labor cracks or inflation re-accelerates), IG is a clipping-carry market
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