Week Ahead: Macro Vol and Economic Tensions
Week Ahead: Macro Vol and Economic Tensions
Calendar, flows, and views for the week
Hey everyone,
This will be a short note because I am writing the macro report. There are several quick things I want to cover though. If you are unaware, I write comprehensive macro reports every month and multiple alpha reports a month that run trades in confluence with these macro reports.
Here are two of the main reports I did last month:
Big Picture:
I will say this over and over but the key in markets is identifying tensions (link). Everyone on Twitter and the media will focus on an extreme recession or extreme shocks happening. In reality, 90% of your time in markets is spent operating in tensions and the other 10% is trading like a savage when the tails actually do occur.
All of these “macro strategists” that “called” 2008 (and yet somehow didn’t make any money doing so) are giving you the answers to the wrong test!
The future distribution of returns is ALWAYS changing and anyone with a deterministic view of the unseen will be crushed (see my previous articles on this idea: Link and Link).
Calendar:
This week we move ahead with minimal events. However, CPI is the following week so traders will be getting hedged and positioned for that macro event. In macro, we are always moving from catalyst to catalysts that function as clearing events for the macro flows.
We do have duration issuance which will be key to watch:
I am watching the December 2025 SOFR contract closely here:
I noted in the alpha reports that traders were positioned WAY to bearish into FOMC. Bonds have played out as I noted. We are now moving into CPI where I will be running the next trades on my bond strategy so keep an eye out for my notes on that this week.
Free Thoughts:
I will explain the macro tensions driving markets in the macro report published this week, but let’s go through a couple of headlines and charts rapid-fire.
Memecoins:
When Memecoins are rallying, that shows there is a TON of private sector liquidity moving down the risk curve. This doesn’t happen during a recession. (Chart: DOGECOIN)
BONK:
Real Estate:
Are there issues in real estate? Of course. That isn’t the question though. The question is how much of this is able to be transmitted to actual economic activity. Let me just say this, EVERYONE knows the bearish case surrounding credit and real estate right now. If you want to have a unique view, it is about the transmission, catalyst, and potential timing of things.
Bitcoin:
I have laid out my view on BTC already:
Bottom line, we are likely moving higher from here for a final leg up of the cycle this year:
Momentum:
A key thing to remember is that we remain in a positive momentum regime for equities. This is something you want to connect to the underlying macro drivers. For example, this most recent pullback in equities was driven by a variable (rates on the long end) that was unlikely to have persistence on a weekly lookback. When implied vol premiums are rich during short-term macro drivers like this, you want to short vol and get long equities (this is what I have been doing in the alpha reports, it is all documented here: Link, Link, Link).
Wrapping Up:
Let me end with a final idea: in markets (and life), if you know and do what everyone else knows and does, you won’t have exceptional returns.
Information is never evenly distributed through space and time. Opportunity in markets is identifying an informational edge that people DON’T know or aren’t positioned for. Just remember that most participants in markets either operate under arbitrary rules that are flawed or just don’t care about anything except tracking the index.
My job is 100% focused on alpha generation today. This is what I do and what I am good at. It’s incredibly difficult because it requires all of who you are. This Substack is the full reflection of the entire process I run on a personal, research, and trade generation basis. We will move forward with intentionality and intensity together. Be ready for a lot this week.
