Macro Regime Tracker: The Set Up For FOMC
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 have laid out the macro views for the cycle and the short end in the following reports:
As always, all the systematic models and strategies are laid out below. Thanks
Main Developments In Macro
Global Macro & Trade Developments
KOREA SAYS IT MAY BE HARD TO REACH DEAL WITH US AT APEC: YONHAP
BESSENT: OVERALL FRAMEWORK IS READY ON SOUTH KOREA TRADE
BESSENT: VERY CLOSE ON SOUTH KOREA, NOT QUITE READY BY WEDS.
LULA: WILL HAVE DEFINITIVE SOLUTION WITH US ‘WITHIN A FEW DAYS’
ALCKMIN: PRIVATE SECTOR PARTICIPATION IN US-BRAZIL TALKS IS KEY
ALCKMIN: MORE THAN 1/3 OF BRAZIL EXPORTS SUBJECT TO 50% TARIFFS
BRAZIL’S ALCKMIN: US GOVERNMENT IS YET TO MAKE SPECIFIC DEMANDS
SHEINBAUM: CLOSE TO REACHING US DEAL ON NON-TARIFF BARRIERS
SHEINBAUM SAYS US EXTENDING TRADE DEADLINE FOR SEVERAL WEEKS
SHEINBAUM SAYS SHE SPOKE WITH TRUMP ON SATURDAY
SHEINBAUM TO DISCUSS TRADE AGAIN WITH TRUMP IN SEVERAL WEEKS
TRUMP: THINK WE’LL HAVE A SUCCESSFUL TRANSACTION WITH XI
BESSENT SAYS WE HAVE A FRAMEWORK FOR TRUMP, XI TO DECIDE ON
TRUMP: WE’LL LET CANADA KNOW WHEN TARIFFS TAKE EFFECT
CARNEY SAYS HE WILL MEET WITH CHINESE PRESIDENT XI AT APEC
CARNEY TO DISCUSS BILATERAL ‘COMMERCIAL RELATIONSHIP’ WITH XI
WANG YI HOPES US WORKS IN SAME DIRECTION WITH CHINA: XINHUA
RUBIO HAD CALL WITH CHINESE FOREIGN MINISTER WANG YI TODAY
RUBIO, FOREIGN MINISTER WANG YI DISCUSSED TRUMP-XI MEETING
STATE DEPARTMENT COMMENTS ON RUBIO CALL IN A STATEMENT
LI QIANG CALLS FOR SUPPORTING HONG KONG IN JOINING RCEP: XINHUA
US Macro & Market Data
AMD PACT WITH US TO CONSTRUCT TWO SUPERCOMPUTERS: RTRS
NEXTERA, GOOGLE TO ACCELERATE NUCLEAR ENERGY DEPLOYMENT IN US
GOOGLE, NEXTERA ENERGY PARTNER TO REOPEN IOWA NUCLEAR PLANT: FOX
Solid Inflows to US Equity Funds: Deutsche Bank Strategists
Trade Progress Boosts Risk Appetite as Gold Slumps: Macro Squawk
HOUSE SPEAKER MIKE JOHNSON TALKS TO REPORTERS ABOUT SHUTDOWN
JOHNSON: MORE CHALLENGING TO FIND WAYS TO SHIFT FUNDS AROUND
International Macro & Policy Backdrop
BULLOCK: RBA’S RATE MIGHT NOT COME DOWN AS FAR AS OTHERS
BULLOCK: CENTRAL BANKERS BIT CONFUSED ABOUT SANGUINE MARKETS
BULLOCK: EMPLOYMENT MARKET OUTCOMES BETTER THAN SOME COUNTRIES
OPEC+ BASE CASE SCENARIO IS SMALL HIKE FOR NOW, DELEGATES SAY
PAN SAYS PBOC TO RESUME GOVT BOND TRADING IN MARKET: XINHUA
ARGENTINA’S MERVAL STOCK GAUGE SURGES 20% AFTER MILEI WIN
ARGENTINE PESO JUMPS 10% AFTER MILEI’S MIDTERM ELECTION WIN
TRUMP: MILEI HAD A LOT OF HELP FROM US
ZELENSKIY: UKRAINE TO EXPAND STRIKES AGAINST RUSSIAN REFINERIES
Macro Tear Sheets: Equities, Stock/Bond Correlation, Fixed Income, FX, Crypto, and Commodities
Macro Regime Dashboard: Excel spreadsheet for economic data,
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
******** UPDATED CODE TO BE RUN TOMORROW ********
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 Steady, Breadth Improves as Trade Tensions Ease (S&P +0.32%)
Risk stayed constructive with the S&P 500 up +0.32%. The tone was buoyed by continued US-China trade de-escalation headlines and a supportive earnings backdrop, while rate markets were calm and liquidity healthy into a heavy megacap results week.
Sector Attribution
Weighted Return Contribution (Index +0.32%)
Leaders: Info Tech (+0.18%), Comm Services (+0.06%), Discretionary (+0.04%), Health Care (+0.03%), Industrials (+0.01%), Real Estate (+0.01%), Utilities (+0.01%)
Drags: Staples (−0.01%), Materials (≈−0.00%), Energy (≈−0.00%); Financials flat
Unweighted Performance (Breadth)
Leaders: Comm Services (+0.56%), Utilities (+0.50%), Info Tech (+0.51%), Discretionary (+0.38%), Health Care (+0.29%), Real Estate (+0.29%), Industrials (+0.08%)
Laggards: Staples (−0.26%), Energy (−0.15%), Materials (−0.14%)
Read: Participation broadened beyond megacaps. Tech and Comm Services stayed in charge on AI/data-center momentum, while Utilities and Health Care caught a steady-rates bid. Weakness in Staples/Energy/Materials looked like rotation, not stress.
Macro Overlay
Tape & Catalysts
Trade thaw: Negotiators lined up deliverables for a Trump–Xi summit, keeping risk appetite intact and supporting US-listed China proxies.
Earnings in focus: With MSFT, GOOGL, META, AMZN, AAPL reporting mid-week, the market is leaning on resilient profit stories; sales beats are running strong.
Rates/FX: 2-yr auction cleared essentially on-the-screws (~3.50%) with solid indirect participation, signaling steady foreign demand. The USD was little changed; gold steadied after slipping below $4,000; crypto mixed.
Global tone: Asia mixed after Nikkei > 50,000; Australia softer. Oil was little changed near the low-60s.
The Read-Through
Re-risking via earnings + diplomacy: Equities are digesting macro noise as trade headlines improve and profit momentum holds.
Quality + duration mix: Tech leadership persists, but Utilities/Health Care participation hints at a balanced “growth plus carry” bid.
No rates shock: Calm auctions and contained yields keep the equity multiple supported.
What I’m Watching Next
Megacap prints & guides: Do AI capex and cloud run-rates validate Tech’s leadership?
Trade optics: Any concrete deliverables from the Trump–Xi track that sustain the risk bid.
Rotation durability: Whether Utilities/Health Care outperformance extends (maturing momentum) or flips back to pure cyclicals.
Bottom line: A calm, earnings-led grind higher with trade diplomacy as a tailwind and rates cooperation keeping the runway clear.
US IG Credit Wrap: Risk-On Holds, Spreads Anchored; Trade Optimism Keeps Carry Alive (IG OAS ≈50.2 bp)
Investment-grade credit stayed resilient even as equities pushed to new highs and oil held near $60. The index option-adjusted spread remains locked around 50 bp, well inside the five-year average (~61.9 bp) and still roughly 6 bp above cycle tights (~46 bp). Despite sharp moves in equities and commodities, credit markets continue to signal a stable, low-vol environment, classic carry conditions rather than stress or exuberance.
Where We Sit (from today’s chart)
IG OAS: ~50.2 bp (last 50.22)
5-yr avg: ~61.9 bp → ~12 bp inside
Cycle tights: ~46.1 bp → ~4 bp above
2022 wides: ~111.2 bp → ~61 bp tighter
Read: The OAS remains mid-range, comfortably normalized and anchored. The spread market refuses to chase the equity rally or flinch at cross-asset volatility, reflecting confidence in liquidity, fundamentals, and a benign policy path.
Tape & Macro Overlay
Equities:
The S&P 500 added +0.32%, extending record territory as US–China trade diplomacy and a solid corporate earnings slate buoyed sentiment. Breadth improved, with Tech, Communication Services, and Health Care leading.
Rates/FX:
USTs were little changed (10-yr ~4.00%, 2-yr ~3.50%), maintaining curve stability after last week’s auctions. The USD held steady, and gold hovered near $4,000 after its sharp correction.
Commodities:
Oil (~$61) remains subdued after last week’s spike, helping stabilize inflation optics. Energy equities traded mixed, but credit spreads in the sector remain firm.
Global tone:
Asian equities mixed following Japan’s milestone Nikkei 50,000 print; European data (IFO, M3) show steady if subdued growth. Trade-related headlines remain the key swing factor for cross-asset tone.
Mapping to IG
Base case: The 50–55 bp zone is still home base, fair value in a low-vol, liquidity-rich market.
Bias: Modestly tighter toward high-40s if trade momentum endures and earnings confirm macro resilience.
Financials:
Senior bank paper holds firm, aided by steady issuance absorption and confidence in regulatory flexibility.
Cyclicals (Energy, Materials, Industrials):
Credit impact muted; oil stability keeps Energy carry intact, while tariff headlines drive only marginal idiosyncratic movement.
Defensives (Staples, Health Care, REITs):
Still rich but well-supported by flows, duration stability keeps these sleeves attractive.
Tech/Comms:
Earnings in focus this week (MSFT, GOOGL, META, AMZN, AAPL). Balance sheets remain fortress-like; minimal spread beta to equity volatility.
Risk Markers to Watch
Trade tone: Any concrete progress from the Trump–Xi track anchors the risk tone through month-end.
Oil path: Sustained >$60 brings marginal widening pressure in cyclicals but little systemic impact.
Equity follow-through: A melt-up without credit confirmation would flag late-cycle exuberance, but we’re not there yet.
Systemic tell: Watch 60 bp OAS, only a decisive break above signals a regime shift, still a low-probability tail.
Credit remains calm, carry-focused, and orderly. With equities setting records and macro risks contained, US IG spreads remain comfortably rangebound, a picture of stability amid optimism. Until the trade narrative breaks or oil reawakens inflation fears, expect OAS to hover near 50 bp and grind tighter on dips.
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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