Macro Regime Tracker: The risks in macro
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:
Today I recorded a spaces on Twitter where I covered some of the top questions people have about how the macro regime is developing. You can find the recording here: LINK
I also recorded a video explaining how the Fed fits into various stock bond correlation regimes: (the connected report is here: LINK)
Most Recent Macro Research:
All of the major pieces for WHERE we are can be found here:
Liquidity Tides and Strategic Positioning in Bitcoin and Gold (IMPORTANT ONE)
The Credit Cycle Is Built on the Consumer—and Will End With Them
And I have updated all of the models and strategies below. If you are a paid subscriber, keep a close eye on the chat as we move into FOMC this week.
Main Developments In Macro
US Fiscal Policy & Treasury Issuance
TREASURY SAYS BORROWING EST. JUMP MAINLY DUE TO CASH BALANCE
US TWO-YEAR NOTES DRAW 3.920%; ALLOTTED AT HIGH 58.43%
US AWARDS 55.3% OF TWO-YEAR NOTES TO INDIRECT BIDDERS
US AWARDS 34.4% OF TWO-YEAR NOTES TO DIRECT BIDDERS
US TWO-YEAR NOTES BID/COVER RATIO 2.62 VS. 2.58 PREVIOUS AUCTION
TREASURY WI 2Y YIELD 3.925% BEFORE $69 BILLION AUCTION
Monetary Policy & Fed Watch
TRUMP ASKED IF FED SHOULD CUT RATE THIS WEEK: I THINK IT HAS TO
TRUMP REITERATES HE WANTS LOWER INTEREST RATES
US JULY DALLAS FED MANUFACTURING INDEX 0.9; EST. -9.0
US Trade Policy & Tariffs
TRUMP: THINKING ABOUT TARIFF RANGE OF 15%-20% FOR OTHER NATIONS
TRUMP: WILL BE SETTING TARIFF FOR 'THE REST OF THE WORLD'
TRUMP: WILL ANNOUNCE PHARMA TARIFFS SOON
TRUMP: WILL DO SECONDARY SANCTIONS ON RUSSIA UNLESS DEAL MADE
TRUMP TOUTS RUSSIAN RARE EARTHS AS POTENTIAL TRADE PRODUCT
CHINA, US START TRADE TALKS IN STOCKHOLM
US FREEZES EXPORT CONTROLS TO SECURE TRADE DEAL WITH CHINA: FT
CARNEY SAYS TRADE NEGOTIATIONS WITH US AT 'INTENSE PHASE'
CHILE WON'T RETALIATE US TARIFFS, FINANCE MINISTER SAYS: EMOL
CORRECT: CHILE'S MARCEL HOPES FOR COPPER TARIFF EXCEPTION: EMOL
EU–US Trade Deal Headlines
EU TO BUY US MILITARY EQUIPMENT IN TRADE DEAL: WHITE HOUSE
EU PLEDGES NO ELECTRONIC TRANSMISSION TAX IN DEAL: WHITE HOUSE
WHITE HOUSE'S RAPID RESPONSE X ACCOUNT POSTS EU DEAL DETAILS
EU'S $600B US INVESTMENT TO COME FROM PRIVATE SECTOR: POLITICO
SEFCOVIC: STRATEGIC COOPERATION WITH US BETTER THAN TRADE WAR
SEFCOVIC: STRATEGIC US AI CHIP PURCHASES PART OF TRADE DEAL
EU'S SEFCOVIC: DEAL WITH US IS OPENING OF PROCESS
EU'S SEFCOVIC: 0% EU-US TARIFF LIST REMAINS OPEN TO ADDITIONS
SEFCOVIC: BELIEVE US PURCHASE NUMBERS IN TRADE DEAL ACHIEVABLE
US–Russia Tensions
TRUMP: WILL MAKE NEW DEADLINE TO RUSSIA
TRUMP: WILL MAKE NEW DEADLINE OF 10–12 DAYS TO RUSSIA
TRUMP: WILL ANNOUNCE NEW RUSSIA DEADLINE TONIGHT OR TOMORROW
TRUMP ON PUTIN: I'M NOT SO INTERESTED IN TALKING ANYMORE
TRUMP: ENVISIONED A LOT OF TRADE WITH RUSSIA
TRUMP SAYS HE WILL REDUCE 50 DAY DEADLINE HE HAD FOR PUTIN
Middle East Macro/Geo
TRUMP CITES IRAN FOREIGN MINISTER INTERVIEWS
TRUMP: IRAN SENDING OUT 'BAD SIGNALS'
NETANYAHU AND PUTIN DISCUSSED IRAN
KREMLIN: PUTIN SPOKE TO NETANYAHU ABOUT TENSIONS IN MIDDLE EAST
Industrial & Inflation Inputs
TRUMP: WILL BE DEALING WITH UK ON PHARMA
TRUMP: WE WANT TO BE MAKING PHARMA OURSELVES
TRUMP: WILL ANNOUNCE PHARMA TARIFFS SOON
TRUMP: ENVISIONED A LOT OF TRADE WITH RUSSIA
CHILE WON'T RETALIATE US TARIFFS, FINANCE MINISTER SAYS: EMOL
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:
US Market Wrap: S&P Slips as Defensives Collapse, Tech and Energy Outperform… Breadth Turns Heavier into Fed and Tariff Pivots
The S&P 500 closed down 0.15% Monday in a session defined by sharp defensive underperformance and a market leaning more cautiously into the week’s macro gauntlet. Under the hood, the selloff was deceptively uneven: Tech and Energy rose, while Real Estate, Utilities, and Materials led a broad decline in rate-sensitive and tariff-exposed names. With investors front-running the Fed, the QRA, and a loaded week of earnings, the rotation turned sour beneath the surface.
Sector Contribution Breakdown
(Weighted Return Contribution to S&P 500)
Info Tech (+0.14 pp) – Led the tape again, with semiconductors and AI hardware firms benefiting from stabilized supply chain sentiment and tariff carve-out hopes.
Energy (+0.01 pp) – Marginal support as oil rebounded on China tariff negotiation tailwinds and US-Russia supply squeeze rhetoric.
Consumer Discretionary (+0.01 pp) – Flat to slightly positive, supported by reopening trades and some continued resilience in auto and travel sub-sectors.
Negative Contributors:
Financials (–0.08 pp) – Underperformed amid curve flattening and renewed focus on Powell’s press conference risks.
Health Care (–0.06 pp) – Hit by uncertainty over Trump’s pharma tariff threats and drag from large-cap managed care.
Industrials (–0.03 pp) – Soft PMI tone and tariff-exposed machinery names dragged.
Staples, Real Estate (–0.03 pp) – Broad selling in bond proxy names.
Comm Services (–0.04 pp) – Media and ad-tech names weakened into regulatory risk headlines.
Materials, Utilities (–0.02 pp each) – Materials fell on EU tariff deal disappointment; Utilities sold as bond yields edged up.
Sector Performance Breakdown
(Unweighted Daily Returns)
Energy (+0.45%) – Best-performing sector, helped by firmer crude and lower US inventory chatter. Renewed optimism around China demand supported refiners and upstream.
Info Tech (+0.41%) – Strong showing led by chipmakers and software platforms. Nvidia and second-tier AI names continued to attract momentum inflows.
Consumer Discretionary (+0.07%) – Modest rise led by autos and entertainment, though housing names lagged.
Broad Decliners:
Financials (–0.61%) – Curve pressure weighed heavily, particularly on banks and insurers. Capital markets revenue concerns also lingered.
Health Care (–0.66%) – Pharma names came under pressure as tariff rhetoric heated up; biotech offered little support.
Industrials (–0.33%) – Tariff headlines spooked capital goods and construction names; logistics was flat.
Materials (–0.88%) – Weakest link among cyclicals. EU deal fallout raised concerns about cost absorption across chemicals and packaging.
Real Estate (–1.41%), Utilities (–0.97%), Staples (–0.53%) – Heaviest pressure on duration-sensitive sectors as Treasury yields nudged higher. Traders appear to be lightening up ahead of Powell’s remarks and upcoming supply.
Macro Overlay:
Tariff Reality Bites, Defensive Cracks Widen
Despite a benign headline close, today's tape tells a more complicated story. Real Estate and Utilities sold off hard, foreshadowing nerves over this week’s Fed decision and Wednesday’s Quarterly Refunding Announcement. With the yield curve stable but elevated, and growing concerns that Powell could be pinned between political pressure and inflation inertia, bond proxies are now shouldering the duration load.
Meanwhile, Trump’s EU tariff deal is being met with quiet discontent across Europe and skepticism in US boardrooms. A 15% tariff baseline now feels like the floor, not the ceiling. Auto-exposed names and heavy exporters dragged, and Materials suffered in kind. The China talks in Stockholm are progressing, but details remain thin — and the specter of secondary sanctions and pharma tariffs lingers in the background.
The rotation into cyclicals that held last week’s bid has turned fractured, and now the S&P’s resilience rests on a narrow group of Tech and Energy names.
A Narrow Climb Meets Macro Headwinds
What looked like a quiet session on the surface revealed deteriorating breadth and growing macro fragility. As we head into Wednesday’s triple-header — Fed decision, Powell presser, and QRA — the market is increasingly bifurcated. Tech strength is doing heavy lifting, but with defensives cracking and Financials under pressure, there's little margin for disappointment.
Earnings remain strong, but policy risk is taking center stage. Whether it’s tariffs, the Fed’s employment mandate, or the market’s dependence on ultra-low volatility, this is a week where the narrative could shift sharply.
US IG Credit Wrap: Spreads Tighten to 50.25 bp as Credit Ignores a Mounting Wall of Macro
Current IG Spread: 50.25 bp | 5-Year Avg: 62.74 bp | COVID High: 151.80 bp | Cycle Low: 43.75 bp
Investment-grade spreads remain remarkably subdued, ticking tighter to 50.25 bp as markets cling to the "Goldilocks glidepath" in the face of intensifying macro crosscurrents. While rates push higher, tariffs loom, and Fed politics heat up, credit refuses to budge. This is not disinterest… It's either confidence or willful blindness. Either way, the floor is thin.
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 Overlay: Credit Composure Near the Edge
Tariffs Move From Rhetoric to Risk
Trump’s tariff agenda has evolved from negotiating tactic to near-certainty. The EU accepted a 15% baseline on exports, but auto, pharma, and chip names remain in the firing line and over 200 sector-specific tariff letters are expected this week. Meanwhile, US–China talks continue in Stockholm with some positive noise, but little substance. IG paper is not reacting… yet. That’s a spread mispricing waiting to happen.
Rates Grind Up, But IG Ignores the Signal
The 10-year yield is sitting above 4.40%, and the Treasury’s $1 trillion borrowing estimate has reshaped front-end rate expectations. Still, IG spreads are glued to the floor. The dislocation between nominal yields and credit spreads is growing more severe particularly for long-duration names. If Powell leans hawkish or QRA surprises with longer-duration issuance, spread duration will matter again.
Fed Uncertainty No Longer Just About Policy
Chair Powell’s political insulation is cracking. Multiple governors may dissent this week, and Trump’s building tour isn’t just theatrics it’s a signal. The market may be underestimating how quickly a shift in leadership or messaging could hit credit’s perception of Fed reliability. This is particularly acute for the belly and long end of the curve, where investors rely on forward policy clarity to justify tight spreads.
Capex Slowdown Confirms Tariff Drag
Core capital goods orders are falling, and durable goods prints are flashing red. Even before tariffs are fully implemented, companies are reacting to the uncertainty. This should weigh on IG issuance plans and future cash flow expectations particularly in industrials and materials. Yet for now, spreads reflect no deterioration in corporate creditworthiness. That divergence won’t hold if capex weakness accelerates.
Spreads Don't Bend… They Snap
Investment-grade credit remains stoic, but the backdrop is deteriorating. You have:
A trade regime entering a chaotic final stretch,
Long-end yields grinding higher,
Corporate investment pulling back.
All while IG spreads remain pinned below their historical mean.
This isn’t just tight… Iit’s tight and brittle.
The current level reflects a market priced for perfect execution, but the margin of error is vanishing. One misstep on tariffs, one hawkish tilt from Powell, or a weak earnings signal from a major industrial or tech name and these spreads will reprice sharply.
Mag7 Model:
See the intro published for how to use the Mag7 models here: Link
Short-End Rates Wrap: Easing Expectations Hold at –107.3 bp as Market Awaits Fed Signal and Tariff Path Clarity
Cumulative Implied Easing (to Oct 2026): –107.3 bp
Terminal Rate: 3.257%
September OIS Cut Probability: 64.0% | Implied Rate: 4.161%
The short-end remains perched in a holding pattern, with cumulative easing priced at –107.3 bp effectively unchanged while the September cut probability clings to 64%. The curve is stable, but conviction is thin. With this week’s Fed decision and press conference looming, plus tariff headlines thickening around the US–EU deal and China talks, the market is braced but not budging.
OIS-Implied Policy Path
Macro Overlay: Calm Optics, Crowded Curve
September Still a “Live” Meeting — But Faith is Fading
The market continues to assign a ~64% chance of a cut in September, but pricing has flattened at that level. The catalyst now lies squarely in Wednesday’s Fed meeting and press conference. Powell is expected to hold rates steady, but the language especially on growth risks, tariff pass-through, and labor softening will steer whether 64% becomes 80% or collapses to 40%. A hawkish lean could steepen the front end fast.
Tariff Tail Risk Still Underappreciated
Despite a finalized EU deal and ongoing China negotiations, the tariff risk hasn't dissipated it’s metastasizing. Trump’s rhetoric is firming: 15% is the floor, not the ceiling. While Canada, the UK, and other holdouts negotiate, over 200 tariff notices are due this week. The curve still doesn’t reflect much front-loaded inflation risk, nor does it price a disruption in supply chains that could complicate rate cuts. That's a blind spot.
Fed Optics Matter More Than Ever
The politicization of the Fed continues to bubble. Trump’s visit to the central bank’s renovation site was more than symbolic it’s part of a broader effort to undermine Powell ahead of the 2025 reappointment decision. While this has no immediate impact on policy, the optics of dissent, combined with pressure from Trump-aligned governors, could shift market perception quickly if Powell’s forward guidance wavers.
Capex Cooldown Adds to Caution
Weaker-than-expected core capital goods orders and soft small-business surveys reaffirm that firms are pulling back investment. It’s not recessionary, but it is a material drag on confidence in the soft landing thesis. If July PCE or NFP data miss, the odds of a September cut could surge. But until then, the market isn’t willing to make a preemptive bet.
This Is a Curve in Stasis… Not Comfort
At –107.3 bp, the OIS curve is no longer building in more easing it's simply preserving the current expectation set. That’s a reflection of uncertainty, not confidence.
The market is betting:
Powell holds steady but nods to fall easing.
Trump’s tariff blitz is controlled, not chaotic.
Growth data cools but doesn’t crack.
That’s a fine balance, but every leg of that stool is shakier than it was two weeks ago.
The next 72 hours Powell’s tone, QRA duration bias, and the scale of tariff implementation could determine whether we stay pinned or reset materially wider.
Tactical Portfolio
Morning Trade(s) and Market thread
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