Macro Regime Tracker: USA
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:
Macro Regime Context
Macro Tear Sheets: Equities, Fixed Income, FX, Crypto, and Commodities
Macro Regime Dashboard: Excel spreadsheet for economic data and interest rates
Growth, Inflation, Fixed Income, Credit, and Equities Regime Tracker
AI and Machine Learning Strategies - Macro Regime and Positioning Premiums Strategies: S&P 500, 2-Year Interest Rates, Gold, and Bitcoin
Macro Regime Context:
We had a short day in the markets today, and things are closed tomorrow. I laid out all of the macro views here:
All of the systematic models and tear sheets are below. Happy 4th!
Main Developments In Macro
US Macro & Fed Commentary
US JUNE NONFARM PAYROLLS RISE 147K M/M; EST. +106K
US JUNE UNEMPLOYMENT RATE 4.1%; EST. 4.3%
US JUNE AVERAGE HOURLY EARNINGS RISE 0.2% M/M; EST. +0.3%
US JUNE ISM SERVICES PMI RISES TO 50.8 FROM 49.9; EST. 50.6
US JUNE COMPOSITE PMI 52.9; PRELIM 52.8
US JUNE SERVICES PMI 52.9; PRELIM 53.1
US MAY FACTORY ORDERS RISE 8.2% M/M; EST. +8.2%
US 30-YEAR MORTGAGE RATES FALL FOR FIFTH WEEK TO 6.67%
TREASURIES TUMBLE AFTER STRONG JUNE EMPLOYMENT DATA
TRADERS SCRAP WAGERS ON FED INTEREST-RATE CUT IN JULY
Fed/Treasury Highlights
FED'S BOSTIC SEES RISK OF PRESSURE ON PRICES 'FOR SOME TIME'
ATLANTA FED PRESIDENT RAPHAEL BOSTIC COMMENTS IN Q&A
BESSENT: IF THE FED DOESN'T CUT HERE, MAYBE SEPT. CUT BIGGER
BESSENT: WE ARE AT VERY HIGH REAL INTEREST RATES HERE
BESSENT: OVERALL EMPLOYMENT TREND IS GOOD
BESSENT: OVERALL, JOBS REPORT WAS A GOOD NUMBER
BESSENT: FED COMMITTEE 'SEEMS TO BE A LITTLE OFF' ON JUDGMENT
BESSENT: I WANT TO SEE FED RIGHT-SIZE THEIR BUDGET
BESSENT: HEALTHY FOR FED TO GET SPENDING UNDER CONTROL
BESSENT: 2-YR TREASURIES TELLING YOU OVERNIGHT RATE TOO HIGH
BESSENT: HOPEFULLY GET TO FILL TWO FED BOARD SLOTS NEXT YEAR
BESSENT: LOT OF STRONG CANDIDATES FOR FED CHAIR
US Trade & Geopolitical Developments
TRUMP: LETTERS ON TARIFFS CAN START GOING OUT TOMORROW
TRUMP: WILL BE SENDING OUT LETTERS TOMORROW
TRUMP TO HAVE TAX BILL SIGNING CEREMONY TOMORROW: PUNCHBOWL
WHITE HOUSE PLANNING FRIDAY 9AM SIGNING CEREMONY: PUNCHBOWL
TRUMP TAX BILL CLEARS HOUSE PROCEDURAL VOTE
TRUMP POSTS ON TRUTH SOCIAL ABOUT TAX BILL VOTE IN HOUSE
TRUMP COMMENTS ON TAX BILL VOTE IN TRUTH SOCIAL POST
TRUMP: FOR REPUBLICANS, THIS SHOULD BE AN EASY YES VOTE
TRUMP: WILL SPEAK TO PUTIN AT 10AM
PUTIN SAYS HE WILL TALK TO TRUMP TODAY: IFX
TRUMP'S ENVOY PLANS NUCLEAR TALKS WITH IRAN NEXT WEEK: AXIOS
WITKOFF PLANS TO MEET ARAGHCHI IN OSLO NEXT WEEK: AXIOS
BESSENT: TRUMP WILL DETERMINE IF NATIONS TALKING IN GOOD FAITH
BESSENT: LOOMING ELECTION IN JAPAN MAY BE CONSTRAINING TALKS
BESSENT: MET WITH EU TRADE COUNTERPART THIS MORNING
BESSENT: USTR GREER WILL BE WORKING OVER WEEKEND WITH EU
BESSENT: MEETING WITH EUROPEAN UNION NEGOTIATOR TODAY
BESSENT: TARIFFS CAN CANTILEVER BACK UP TO APRIL 2 LEVELS
BESSENT: WARN COUNTRIES NOT TO DRAG OUT TRADE TALKS
BESSENT: MY UNDERSTANDING, VIETNAM DEAL FINALIZED IN PRINCIPLE
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:
S&P 500 Closes Up 0.45% in Holiday-Shortened Session as Growth, Commodities Lead Again
The S&P 500 rose 0.45% in Thursday’s abbreviated pre-holiday session, extending its rally to new all-time highs. Leadership narrowed further with big tech, financials, and energy doing the heavy lifting, while defensives lagged. A stronger-than-expected June payrolls report helped reinforce confidence in the macro backdrop, cooling immediate rate-cut hopes but supporting a “resilient growth” narrative into earnings season. Markets shrugged off tariff uncertainties as headlines quieted and the Vietnam deal took hold.
Sector Contribution Breakdown (Weighted Return to Index)
Financials (+0.12 pp) – Top contributor as steepening curves and upbeat macro tone lifted banks and insurers.
Information Technology (+0.22 pp) – Broad follow-through after Wednesday’s AI-led gains; Microsoft, Apple, and semis firmed.
Industrials (+0.04 pp) – Logistics and defense names extended strength amid infrastructure optimism.
Communication Services (–0.01 pp) – Slight drag as telecoms slipped; platforms mixed.
Utilities (+0.02 pp) – Marginal gains as yield-sensitive sectors held firm despite higher rates.
Energy / Consumer Discretionary / Staples (0.01 pp each) – Steady session; oil helped E&Ps, while staples found footing after recent softness.
Health Care / Materials / Real Estate (0.00 pp) – Directionless amid holiday thinness.
Sector Performance Breakdown (Unweighted Index Returns)
Financials (+0.88%) – Best performing sector as Treasury curve steepened and rate fears faded slightly.
Info Tech (+0.66%) – Continued strength in AI-linked names and chipmakers.
Industrials (+0.50%), Energy (+0.42%) – Cyclicals supported by macro optimism and crude stability.
Utilities (+0.72%) – Defensive buying persisted despite firm yields.
Discretionary (+0.13%), Staples (+0.24%), Materials (+0.12%) – Mixed across sub-sectors; no dominant themes.
Health Care (+0.03%), Real Estate (+0.11%) – Stabilized after recent volatility.
Comm Services (–0.08%) – Lagged slightly as ad-tech consolidation paused.
Macro Overlay: Solid Payrolls Reinforce Growth Bias, But Fed Remains Patient
1. June Jobs Report: Upside Surprise, But Details More Mixed
Headline NFP: +147k vs 106k expected
Unemployment: Fell to 4.1%, driven partly by a drop in participation
Private payrolls: +74k → weakest since Oct
Wages: +0.2% m/m, slowing from May
While the headline beat, internals were less robust. Still, the report affirmed a solid labor market, enough to push back against a July cut but not hot enough to derail easing expectations entirely.
2. Market Repricing Pushes September Back to “Soft Base Case”
Odds of July cut faded to near-zero
September still in view (~70% chance), but more data needed
Treasuries sold off (2Y yield +10 bp to 3.88%)
Dollar firmed; equity futures held gains
3. Tariff Backdrop Quiet as Vietnam Deal Takes Shape
Trump’s Vietnam accord continues to be received positively, with 0% US import levies and 20% on Vietnamese exports to the US. Broader trade uncertainty remains, but markets appear confident inflation risks are contained.
4. Tech and Financials Reclaim Leadership
Tech megacaps remain the market’s engine, with financials benefiting from the curve’s steepening. Cyclicals followed, while defensives mostly lagged. Participation narrowed, but leadership stayed strong.
Final Word: Growth Resilient, Cuts Deferred, But Trend Intact
The S&P 500’s grind higher reflects a market betting on durability: in growth, in margins, and in AI tailwinds. Thursday’s jobs report helped cool near-term cut expectations but reinforced soft-landing hopes. With the Fed firmly on hold until September and the tariff calendar quiet for now, equities enter Q3 with momentum though valuations and positioning are beginning to matter more. Inflation prints on July 15 and earnings next week are the next key catalysts.
US IG Credit Wrap — Spreads Hit 49.3 bp as Labor, Rates, and Risk Sentiment Compete for Narrative Control
Current Spread: 49.31 bp | 5-Year Average: 62.81 bp
Investment-grade credit spreads narrowed further Thursday to 49.31 basis points—just six ticks above post-pandemic cycle tights—as markets absorbed mixed macro signals with calm resolve. Strong headline job growth, fading July cut expectations, and tariff de-escalation kept carry strategies in favor, even as under-the-surface labor metrics and fiscal overhangs cloud the outlook.
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: Strength on the Surface, Fractures Beneath
1. Payrolls Surprise to Upside, But Labor Details Mixed
NFP: +147k vs. 106k est; Unemployment: 4.1%
Private Payrolls: +74k → slowest since Oct
Participation Rate: Fell to 62.4% → second monthly drop
Wages: +0.2% m/m → softer than expected
The surface data appear strong enough to delay Fed easing until fall. But soft internals—especially in services and participation—support IG’s carry-centric drift as rate volatility remains capped.
2. Powell Keeps Patience Message Alive
Chair Powell stuck to the familiar “wait-and-see” script post-payrolls, acknowledging tariff risks and mixed inflation signals. Markets now price a near-0% chance of a July cut and ~70% for September.
→ Credit sees this as a green light to stay long, not leverage up.
3. Trade Frictions Ease, But Policy Ambiguity Lingers
The US-Vietnam deal eliminating US-bound tariffs and introducing transshipment penalties boosted market clarity—but enforcement risks remain. Canada’s soft reset and the EU’s 10% tariff framework add to the sense that trade policy may stabilize, not shock.
Still, implementation timelines and residual uncertainty limit conviction in tighter credit pricing from here.
4. Credit Anchored as Inflation Path Clouds Duration Conviction
The ISM Manufacturing Index rose slightly to 49.0 but remained in contraction. Prices paid surged to 69.7—highest since 2022—highlighting upstream inflation friction even as employment and demand soften.
→ IG buyers remain duration-neutral: not reaching, not fading.
Final Word: Carry Steady, Risk Appetite Selective
At 49.31 bp, spreads are brushing post-COVID lows—a level historically consistent with stable rate regimes, low realized volatility, and strong Fed credibility. Yet forward conviction is lacking. Labor data cracks, Powell’s patience, and election-year fiscal churn all suggest risk-taking in credit will stay modest and opportunistic rather than thematic. As inflation data and Q2 earnings roll in mid-month.
Mag7 Model:
See the intro published for how to use the Mag7 models here: Link
Short-End Rates Wrap Dovish Glide Holds After Payrolls Beat, Cuts Now –120.7 bp Into Dec 2026
Markets continued to price a historically deep easing cycle despite trimming expectations post-NFP, with cumulative cuts through December 2026 now seen at –120.7 basis points, up modestly from –128.5 bp earlier in the week. The stronger-than-expected June payrolls report helped cool near-term cut bets, but soft private hiring, fading participation, and cautious Fed guidance kept the curve anchored to a lower-for-longer regime.
OIS-Implied Easing Path
Front-End Meetings
04-Jul-25: 4.330% → No cut risk
30-Jul-25: 4.318% (–1.2 bp) → ~5% probability → July priced out post-NFP
17-Sep-25: 4.149% (–16.9 bp) → ~68% probability → September remains base case
29-Oct-25: 3.995% (–15.6 bp) → ~62% probability → Path flattens into Q4
2025 Year-End Outlook
10-Dec-25: 3.815% → –51.5 bp cumulative → Two cuts by year-end firmly priced
Full Cycle Outlook
09-Dec-26: 3.123% → –120.7 bp total → Terminal rate repriced slightly higher, but path remains long
Macro Overlay: Strong Headline, But the Fed Still Has Time
1. Jobs Beat Masks Soft Internals
The June NFP surprised to the upside at +147k vs. +106k est, and the unemployment rate dipped to 4.1%. But private hiring slowed to just +74k the weakest since October with service sector softness and a declining participation rate undermining the headline strength. Wage growth eased to +0.2%, with hours worked falling to 34.2.
→ A “Goldilocks” report that removes urgency but maintains the easing trajectory.
2. September Is Still the Anchor
Despite the repricing, traders continue to favor a September start to the cycle. The curve now sees 1.5–2 cuts by year-end, with a shallow but persistent path through 2026. Market pricing shows conviction in a lower terminal rate below 3.2%.
3. Labor Cracks Justify Fed Patience
Participation dropped again, and Challenger data signals structurally softer hiring. Immigration frictions, ADP’s –33k surprise, and declining average weekly earnings reinforce the argument that the labor market is stabilizing, not accelerating.
Final Word: Glidepath Trims, But Dovish Bias Firm
While implied cuts have been marked up slightly to –120.7 bp, the broader easing thesis remains undisturbed. The Fed is in no rush post-NFP, but consumer fatigue, ADP softness, and a declining labor force participation rate offer it cover to move by September. Unless inflation re-accelerates, the market’s lower terminal bias and confidence in the path looks increasingly durable.
Tactical Portfolio
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