Macro Regime Tracker: Trading The Credit Cycle
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 recorded a full livestream today explaining how I am trading the credit cycle here:
The most recent reports explaining all the views and trades are here:
As always, all the models are updated below.
Main Developments In Macro
US Macro / Fed
GOOLSBEE: SERVICES INFLATION IS AN AREA OF CONCERN AT THE LEAST
TRUMP POSTS ON TRUTH SOCIAL CALLING FED CHAIR AN OBSTRUCTIONIST
TRUMP: JEROME “TOO LATE” POWELL IS AN OBSTRUCTIONIST
SUPREME COURT TO HEAR ARGUMENTS IN JANUARY IN COOK FIRING CASE
SUPREME COURT REFUSES TO LET TRUMP IMMEDIATELY OUST FED’S COOK
US Policy / Government Shutdown
LEAVITT: GDP IMPACT DEPENDENT ON LENGTH OF SHUTDOWN
LEAVITT: LAYOFFS VERY LIKELY DUE TO SHUTDOWN
OMB CHIEF: LAYOFFS WILL HAPPEN IN THE NEXT ONE TO TWO DAYS: NBC
VANCE: IF SHUTDOWN DRAGS ON FOR DAYS, WEEKS, WILL DO LAYOFFS
VANCE: WILL HAVE TO LAY PEOPLE OFF IF SHUTDOWN CONTINUES
JOHNSON REFERS TO OFFICE OF MANAGEMENT AND BUDGET
JOHNSON: OMB HAS TO DECIDE ON ESSENTIAL GOVERNMENT SERVICES
SPEAKER JOHNSON: THERE’S NOTHING FOR ME TO GIVE, TO NEGOTIATE
JOHNSON: NOTHING WE CAN DO TO MAKE STOPGAP BILL BETTER FOR DEMS
JOHNSON: HOUSE WILL BE RETURNING NEXT WEEK
SPEAKER JOHNSON ON SHUTDOWN: HOPING FOR A BREAKTHROUGH TODAY
THUNE: SHUTDOWN ENDS WHEN DEMOCRATS BACK HOUSE-PASSED GOP BILL
US Trade / Foreign Policy
TRUMP DELAYING PHARMA TARIFFS TO NEGOTIATE DRUG PRICES:POLITICO
TRUMP: I’LL BE MEETING WITH PRESIDENT XI IN 4 WEEKS
TRUMP: I’LL BE MEETING WITH PRESIDENT XI
US IS IMPLEMENTING SNAPBACK SANCTIONS AGAINST IRAN: RUBIO
US SAID TO SEEK REPEAL OF BASEL RULE CHANGE THAT AIDED BNP
Global Macro (Non-US but Relevant)
ECB’S GUINDOS: CURRENT LEVEL OF RATES IS THE CORRECT ONE
BOE’S MANN: I PREFER A LONGER HOLD ON RATES
BOE’S MANN: INFLATION EXPECTATIONS HAVE DRIFTED
BOE’S MANN: RATES ON HOLD APPROPRIATE FOR CURRENT PERIOD
BOE’S MANN: HIGHER FOR LONGER INFLATION RISK PLAYING OUT
BOE’S MANN: HAVE TO BALANCE INFLATION AND ACTIVITY
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: Health Care & Tech Carry Gains as Shutdown Clouds Data (S&P +0.79%)
The S&P 500 rose 0.79%, extending its rally to a fourth straight session and closing at a fresh record high. Strength came from defensives and rate-sensitive growth sectors, with Health Care and Info Tech providing the bulk of the lift, while Financials and Materials lagged. The backdrop remains defined by the government shutdown, which threatens to delay Friday’s payrolls release, leaving the Fed reliant on private data and proxies to gauge labor momentum.
Sector Attribution
Weighted Return Contribution to Index
Leaders: Info Tech (+0.43%), Health Care (+0.22%), Consumer Discretionary (+0.12%).
Drags: Financials (–0.09%), Materials (–0.02%), Staples (–0.01%).
Net: S&P 500 +0.79%.
Sector Performance (Unweighted Breadth)
Winners: Health Care (+2.43%), Info Tech (+1.23%), Consumer Discretionary (+1.12%), Industrials (+0.36%).
Losers: Materials (–1.00%), Financials (–0.65%), Staples (–0.17%).
Net: S&P 500 +0.79%.
Macro Overlay
Shutdown & Data Void
Markets appear unfazed by the first US government shutdown in nearly seven years. Equities leaned on sector rotation rather than broad macro momentum, even as the looming data blackout could deprive the Fed of its most important high-frequency read on the labor market.
Labor Market Signals
ADP data showed private payrolls fell 32k in September, the second consecutive monthly decline and well below expectations. ISM manufacturing pointed to contraction for the seventh straight month, though employment and production improved slightly. Together, the reports reinforced the “low-hire, low-fire” labor environment, consistent with Fed easing expectations.
Rates & Commodities
Treasuries rallied, with the 10-year yield dipping toward 4.10%. Gold extended to fresh record highs as the dollar held steady. Oil inventories rose modestly, though Cushing stocks declined again, underscoring fragile balance in physical supply.
The Read-Through
The Fed’s October meeting remains live for another “insurance” cut, with investors leaning on the view that officials have enough evidence of labor market cooling even without the BLS payrolls print. Sector leadership Health Care, Tech, and Discretionary pulling ahead while Financials and Materials slump, reflects a market hedging toward policy-sensitive defensives and growth, not a broad embrace of cyclical recovery.
Takeaway: With shutdown politics muddying the data stream and ADP pointing to slower job growth, the market is relying on defensives and rate-sensitive growth leadership. The bias is toward caution, not capitulation, as investors hedge for a slower-growth, lower-rate path.
US IG Credit Wrap: Carry Holds in Low-50s; Shutdown Data Void, Softer Labor (IG OAS ~52.1 bp)
IG spreads remain pinned in the carry channel. Bloomberg US IG OAS prints ~52.1 bp (chart last: 52.098), essentially unchanged as equities grind higher and 10s rally toward ~4.10%. The market is treating the government shutdown as a visibility problem more than a growth shock; spreads are grinding, not breaking.
Credit context (where we sit) — from the chart
IG OAS: ~52.1 bp
5-yr avg: ~64.8 bp → ~13 bp inside
Cycle tights: ~43.8 bp → ~8 bp away
Pandemic wides: ~151.8 bp → ~100 bp tighter
(Chart stats: Last 52.098 | High 151.798 on 03/20/20 | Avg 64.825 | 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.
What changed today (macro tape)
Risk backdrop: S&P at a fresh high; fourth up day. Gold to a record; dollar steady. 10-year ~4.10% after a small rally.
Shutdown: Data blackout likely delays BLS payrolls; Fed forced to lean on private proxies. Market still prices further easing.
Labor signal: ADP –32k (second monthly drop) and ISM manufacturing still in contraction, consistent with a “low-hire, low-fire” slowdown rather than a shock.
How this maps to credit
Primary market: Window stays open; no systemic concession creep. Idiosyncratic stories matter more than index direction.
Path to tighter: Needs a short shutdown, orderly labor cooling, and benign inflation prints that keep Fed cuts alive.
Path to wider: A prolonged data blackout with headline layoffs, or a growth scare/bull steepener that pressures cyclical cashflows.
The read-through
Base case is a sideways grind in the low-50s with carry doing the heavy lifting. Risk case pushes toward the high-50s if the shutdown lingers and labor softness meets policy noise. Until then, IG remains a carry market
Mag7 Model:
See the intro published for how to use the Mag7 models here: Link
Capital Flows Interest Rate Sensitivity Model:
All of the interest rate sensitivity models are now reserved exclusively for paid subscribers. If you would like to do a free trial, you can with this LINK.
Launch video for these models is here: LINK
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