Macro Regime Tracker: The Macro Play
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:
I want to share several words related to the macro regime to explain WHERE we are:
This period of time is NOT normal. As I laid out yesterday, we are seeing a collocation of forces increasing liquidity in the system.
Don’t confuse a positioning unwind with a macro inflection point. We remain ABOVE the FOMC level and could easily have a marginal pullback before another leg higher. My bias continues to be to the upside though.
We have see the DXY rally since FOMC driven by monetary policy differentials.
If you are trying to understand the drivers of the dollar here, see this report:
MAINTAIN RISK MANAGEMENT AND CLARITY OF THOUGHT.
All of the models and strategies are updated below.
Main Developments In Macro
US Macro & Fed Policy
FED GOVERNOR STEPHEN MIRAN SPEAKS AT EVENT IN NEW YORK
MIRAN: FED MANDATES LESS IN TENSION THAN SOME COLLEAGUES THINK
MIRAN: FED POLICY IS MORE RESTRICTIVE AS NEUTRAL RATE CAME DOWN
MIRAN: MY BEST ATTEMPT AT REAL NEUTRAL RATE ESTIMATE IS 0.5%
MIRAN: NEED TO BE HUMBLE ABOUT ESTIMATES OF NEUTRAL RATE
MIRAN: I’M MORE SANGUINE ON INFLATION OUTLOOK THAN MANY OTHERS
MIRAN: ADDITIONAL RESTRICTIVENESS POSES RISK GOING FORWARD
MIRAN: MONETARY POLICY INSULATION FROM S/T POLITICS IS CRITICAL
MIRAN: PRIVATE DATA AREN’T SUFFICIENT REPLACEMENT FOR GOVT DATA
MIRAN: REMAIN OPTIMISTIC WE’LL HAVE DATA BY OCTOBER FED MEETING
MIRAN: US GOVERNMENT DATA ARE GOLD STANDARD AROUND THE WORLD
MIRAN: DECLINING RESPONSE RATES HAVE BEEN SIGNIFICANT PROBLEM
MIRAN: TARIFF INFLATION MAY BE YET TO COME BUT HAVEN’T SEEN YET
MIRAN: I THINK A LOT OF THAT UNCERTAINTY HAS RESOLVED
MIRAN: FED’S MIRAN DOESN’T EXPECT CAPITAL FLOWS TO US TO DECLINE
MIRAN: MY VIEW IS MONETARY POLICY SHOULD BE FORWARD-LOOKING
FED’S MIRAN: UNCERTAINTY WEIGHED ON ECONOMY IN H1 2025
MINNEAPOLIS FED PRESIDENT NEEL KASHKARI COMMENTS IN Q&A
KASHKARI: FOMC COMMITTED TO DATA-BASED, NOT POLITICAL DECISIONS
KASHKARI: DRASTICALLY LOWERING RATES WOULD CAUSE BURST IN INFL.
FED’S KASHKARI SAYS DATA SENDING SOME STAGFLATION SIGNALS
ATLANTA FED PRESIDENT RAPHAEL BOSTIC SAYS IN MODERATED Q&A
BOSTIC: TURBULENCE LEADING FIRMS, HOUSEHOLDS TO BE CAUTIOUS
FED’S DALY CAUTIONS AGAINST THINKING ALL BUBBLES ARE FINL:AXIOS
DALY SEES MORE TECH `IN PLACE OF HIRING’ AS ECO SLOWS: AXIOS
DALY: NOT SEEING EVIDENCE OF MASS JOB REPLACEMENT BY AI: AXIOS
NY FED: HOUSEHOLDS’ OUTLOOK FOR LABOR MARKET DETERIORATES
NY FED: MORE HOUSEHOLDS REPORT BEING BETTER OFF THAN YEAR AGO
NY FED: ONE-YEAR INFLATION EXPECTATIONS RISE TO 3.38% VS 3.2%
NY FED: 1Y CONSUMER INFLATION EXPECTATIONS IN SEPT 3.4% VS 3.2%
NY FED: 3Y CONSUMER INFLATION EXPECTATIONS UNCHANGED AT 3%
NY FED: 5Y CONSUMER INFLATION EXPECTATIONS IN SEPT 3% VS 2.9%
Global Macro Links / Trade / Tariffs
LEBLANC: DISCUSSED WAYS TO DEEPEN CANADA-US ENERGY PARTNERSHIP
LEBLANC: CANADA, US HOPE TO REACH DEAL ON STEEL, ALUMINUM
LEBLANC: US, CANADA HOPE TO REACH SECTORAL TARIFF DEAL QUICKLY
TRUMP ON TRADE DEAL: I THINK CANADIANS WILL LOVE US AGAIN
TRUMP: WE WILL HAVE TARIFFS BETWEEN CANADA AND US
TRUMP: WANT TO MAKE OUR CARS HERE, WANT CANADA TO DO WELL
TRUMP: ON USMCA: WE CAN RENEGOTIATE IT OR DO DIFFERENT DEALS
TRUMP: WILL MEET XI IN A FEW WEEKS IN SOUTH KOREA
WTO SAYS ‘FULL IMPACT’ OF TRUMP TARIFFS MAY HIT NEXT YEAR
WTO: GOODS TRADE GROWTH SEEN AT 2.4% THIS YR, 0.5% IN 2026
SEFCOVIC: WILL DISCUSS STEEL RINGFENCING, DERIVATES WITH US
EU PROPOSES TO LIMIT TARIFF-FREE STEEL IMPORTS: SEJOURNE
Europe/ECB – Relevant for US Macro Context
ECB’S LAGARDE SAYS EU INSTITUTIONS WATCHING FRANCE SITUATION
LAGARDE: EU INSTITUTIONS HOPE FRANCE FINDS PATH TO BUDGET
EU TRADE COMMISSIONER MAROS SEFCOVIC COMMENTS IN STRASBOURG
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: Tech and Discretionary Lead Pullback Amid Buyer Fatigue (S&P –0.49%)
After a relentless rally that added over $16 trillion in market cap since April, the S&P 500 finally took a breather (–0.49%), with mega-caps and tech leading the retreat. Oracle’s softer-than-expected cloud margins and Tesla’s price cuts triggered profit-taking across the AI complex, while investors digested a crowded sentiment backdrop and over-extended valuations. Bonds found a bid as a $58 billion 3-year Treasury auction cleared smoothly, nudging yields lower.
Sector Attribution
Weighted Return Contribution to Index
Leaders: Consumer Staples (+0.05%), Energy (+0.01%), Health Care (+0.01%)
Drags: Info Tech (–0.33%), Discretionary (–0.09%), Industrials (–0.06%), Comm Services (–0.05%)
Net: S&P 500 –0.49%
Sector Performance (Unweighted Breadth)
Winners: Consumer Staples (+0.93%), Utilities (+0.20%), Energy (+0.23%), Health Care (+0.08%)
Losers: Info Tech (–0.94%), Discretionary (–0.87%), Industrials (–0.73%), Materials (–0.40%), Comm Services (–0.49%)
Net: S&P 500 –0.49%
Macro Overlay
Exhaustion After Euphoria
The AI trade that’s powered this year’s melt-up finally paused with some “buyer fatigue” after a historic run. Oracle’s margin disappointment and Tesla’s price-cut headline sparked rotation out of high-multiple tech and into defensives and energy. Wall St client sentiment index remains at its most bullish since December, and another IB’s exuberance gauge still flirts with “manic” territory, a sign the pullback may be as much about positioning as macro.
Fed Tone and Rates
Yields drifted lower (10-yr 4.13%, –3 bp) as a solid Treasury auction offset hawkish comments from Minneapolis Fed’s Kashkari and a sanguine read from Governor Miran. Miran reiterated that tariffs pose limited inflation risk and that policy remains overly restrictive, implying scope for continued easing. Markets still price October as a live meeting for a 25 bp cut, but Fed messaging suggests incremental moves will stay data-dependent, especially given the risk of a government data blackout if the shutdown persists.
Macro Narrative Shift
The day marked a turn from euphoria to evaluation. Markets are starting to ask whether AI profitability timelines justify current multiples and how fragile sentiment has become after months of uninterrupted gains. Some Wall St firms flagged that a short, shallow pullback would be constructive if earnings momentum holds. In contrast, some warn that profit-taking risk has risen materially, especially in the Nasdaq.
Cross-Asset Moves
The dollar strengthened (+0.4%) as yen slid past 151.9 per dollar. Gold continued toward $4,000/oz (+0.5%), oil rose (+0.6%) to $62/bbl, and Bitcoin dropped (–2.6%). Credit and rates markets stayed orderly, signaling that this was a position-driven pause, not a risk-off rotation.
The Read-Through
The market’s excess is finally meeting resistance. Tech’s drag underscores how narrow the advance had become, a few AI heavyweights propped up indices while cyclicals and defensives lagged. This correction looks like a healthy reset within a broader bullish trend, provided yields stay contained and earnings deliver.
Takeaway: After a $16 trillion run, momentum finally blinked. Wider market nthusiasm remains high, but it needs proof that AI profits can justify valuation. The Fed’s measured tone offers support, yet positioning is crowded and breadth is thin, a setup for choppy consolidation rather than capitulation.
US IG Credit Wrap: Low-50s Hold as Equities Exhale; Bid for Duration Returns (IG OAS ~51.4 bp)
IG spreads stayed inside the carry channel despite a tech-led equity pullback and a firmer dollar. A well-received $58bn 3-year auction helped nudge UST yields lower, cushioning credit beta. Bloomberg US IG OAS sits ~51.4 bp (chart last: 51.425), basically unchanged to a touch wider vs yesterday.
Where we sit (from the chart)
IG OAS: ~51.4 bp
5-yr avg: ~62.4 bp → ~11 bp inside
Cycle tights: 43.8 bp → ~7–8 bp off
Pandemic wides: 151.8 bp → ~100 bp tighter
(Chart stats: Last 51.425 | High 151.798 on 03/20/20 | Avg 62.380 | 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: Momentum pause after a $16T run; mega-cap/AI complex led the drag as Oracle margin chatter and Tesla price cuts hit sentiment.
Rates: UST 10y ~4.13% (–3 bp) as the 3-yr auction cleared cleanly; curve stable.
USD/Commods/Crypto: Dollar firmer; gold +0.5% toward $4,000/oz; WTI ~+$0.6; Bitcoin lower.
Fed tone: Gov. Miran sees limited tariff pass-through and room to keep easing; Kashkari warns against drastic cuts—net read = measured, data-dependent easing path with shutdown-driven data gaps still a risk.
How this maps to credit
Carry over convexity: Low-50s OAS keeps the asset class in “clip-the-coupon” mode; the small equity wobble wasn’t enough to force spread beta wider.
Rates cushion: A mild rally in duration offsets equity softness—supportive for long-duration A/AA demand.
Quality skew / dispersion: Index stability masks idiosyncratic spread moves; high-beta BBB cyclicals remain most sensitive if profit-taking extends or if reals back up.
Correlation check: Stronger USD + softer tech normally lean wider, but auction strength and still-benign macro kept IG pinned.
The read-through
Base case remains a sideways grind in the low-50s: equities consolidate, rates contained, and policy guidance steady. Without a clear macro break (labor crack vs. inflation re-accel), IG is carry-led with selective dispersion.
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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Launch video for these models is here: LINK
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