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Macro Regime — 2011-W31

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↩ Home Macro index ← 2011-08 board

Standing macro backdropBORROWED

Borrowed from its month (2011-08); the weekly reads the standing object, it does not recompute the aggregate.

United States: overheating / late-cycle
China: overheating / late-cycle
Euro area: stall-speed, at target
Japan: deflation watch

month aggregated actuals

United States

Indicator	Basis	2011-08	2011-07	Change
Core CPI	% MoM	0.29 2011-08-01	0.23 2011-07-01	→ 0.06
Core PCE	% YoY	1.84 2011-08-01	1.73 2011-07-01	▲ 0.11
CPI (YoY)	% YoY	3.75 2011-08-01	3.58 2011-07-01	▲ 0.17
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	50.9 2011-08-01	55.3 2011-07-01	▼ -4.4
PMI (svc)	index	52.7 2011-08-03	53.3 2011-07-06	▼ -0.6
Policy rate	%	0.25 2011-08-31	0.25 2011-07-31	→ 0
2s10s slope	pp	2.03 2011-08-31	2.46 2011-07-29	▼ -0.43
Unemployment	%	9 2011-08-01	9 2011-07-01	→ 0
10Y yield	%	2.23 2011-08-31	2.82 2011-07-29	▼ -0.59
2Y yield	%	0.2 2011-08-31	0.36 2011-07-29	▼ -0.16

China

Indicator	Basis	2011-08	2011-07	Change
CPI (YoY)	% YoY	6.5 2011-08-09	6.4 2011-07-09	→ 0.1
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.9 2011-08-01	50.7 2011-07-01	→ 0.2
PMI (svc)	index	57.3 2011-08-01	56.6 2011-07-01	▲ 0.7
Policy rate	% (1Y LPR)	not recorded
2s10s slope	pp	0.21 2011-08-31	0.32 2011-07-29	▼ -0.11
Unemployment	%	not recorded
10Y yield	%	4.11 2011-08-31	4.05 2011-07-29	▲ 0.06
2Y yield	%	3.89 2011-08-31	3.72 2011-07-29	▲ 0.17

Euro area

Indicator	Basis	2011-08	2011-07	Change
CPI (YoY)	% YoY	2.5 2011-08-31	2.5 2011-07-29	→ 0
FX vs USD	px	not recorded
GDP	% YoY	-0.6 2011-08-01	0 2011-07-01	▼ -0.6
PMI (mfg)	index	49.7 2011-08-23	50.4 2011-07-21	▼ -0.7
PMI (svc)	index	51.5 2011-08-23	51.4 2011-07-21	→ 0.1
Policy rate	%	1.5 2011-08-04	1.5 2011-07-07	→ 0
Unemployment	%	10 2011-08-31	9.9 2011-07-01	→ 0.1
10Y yield	%	4.2 2011-08-01	4.6 2011-07-01	▼ -0.39

Japan

Indicator	Basis	2011-08	2011-07	Change
Core CPI	% YoY	-0.5 2011-08-25	-0.8 2011-07-26	▲ 0.3
CPI (YoY)	% YoY	0.2 2011-08-25	-0.4 2011-07-26	▲ 0.6
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2011-08-04	0.1 2011-07-12	→ 0
Unemployment	%	4.7 2011-08-29	4.7 2011-07-30	→ 0
10Y yield	%	1.02 2011-08-01	1.07 2011-07-01	▼ -0.05

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

overheating / late-cycle

stall · above target · on hold

Above-trend growth with above-target inflation. Late-cycle: cyclicals and inflation beneficiaries can still run, but the central bank is biased to tighten, so duration and high-multiple growth are exposed.

● 1 active

China

overheating / late-cycle

stall · above target · on hold

○ no change

Euro area

stall-speed, at target

stall · at target · on hold

Growth hovering near flat with inflation roughly at target. A balanced, low-conviction regime — direction depends on which way growth breaks next; watch PMI for the tell.

○ no change

Japan

deflation watch

unknown · deflation risk · on hold

Activity is soft and inflation is at/below zero — the risk is entrenched deflation. Favors duration (long bonds) and quality; cyclicals struggle until policy eases decisively. The catalyst to watch is stimulus / a policy cut.

○ no change

Mechanisms & channelsL2

United States

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 2.47 → 2.58 (+0.11)

The 10-year yield jumps.
Why: The long yield sets the cost of long-term money for the whole economy and the discount ratediscount rate — The rate used to convert a future cash flow into today's value. A higher discount rate makes far-off cash flows worth less now. for the longest cash flows.
The discount rate on all long-dated cash flows rises.
Why: Equity valuations and long-bond prices are present values of distant cash flows; a higher long yield shrinks those present values.
Long-duration growth equities compress, long bonds fall, gold is pressured.
Why: The longest-duration assets are most exposed to the discount-rate move, and a higher real yieldreal yield — The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation. raises the opportunity cost of holding non-yielding gold.

Helps
banks/insurers (reinvestment)cashvalue over growth

Hurts
long-duration growth equitieslong-dated bondsgoldrate-sensitive REITs/utilities

Caveat: Granularity is daily, so a single-session jump can be noise; a sustained multi-session move is the real signal. Distinguish a growth-driven rise (risk-on) from a supply/term-premium rise (risk-off).

House-view hook — empty (textbook default; Stephen's view bakes in here).

What would change the read

Inflation surprise (upside) Core inflation is steady, so the upside-surprise channel is quiet. It would fire on a core reading ≥0.2pp above the prior — watch it because that is what forces a central bank to stay restrictive and pressures the longest-duration assets first.
Inflation surprise (downside / disinflation) Core inflation isn't cooling fast enough to trigger the disinflation channel. A fall of ≥0.2pp would fire it — worth watching because it is the cleanest tailwind for long-duration growth and government bonds.
Monetary easing (rate cut) The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.

China

No active mechanism this week — the standing read above carries the bloc.

What would change the read

Growth acceleration (expansionary PMI) Manufacturing isn't both expanding and accelerating, so the growth-acceleration channel is dormant. A rising PMI back above 50 would fire it — it matters because it's the signal to rotate from defensives toward cyclicals.
Growth slowdown (deepening contraction) Manufacturing is not both below 50 and falling, so the deepening-contraction channel is dormant. It fires when a sub-50 PMI turns lower — that is the trigger for the defensive rotation and a bid for duration (a sub-50 PMI that is *rising* is the trough channel, M13, not this one).
Long-end yield spike / term-premium rise The 10-year yield isn't spiking, so this channel is dormant. A jump of ≥0.1pp would fire it — watch it because it compresses the highest-multiple growth names and long bonds fastest.

Euro area

No active mechanism this week — the standing read above carries the bloc.

What would change the read

Monetary easing (rate cut) The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.
Monetary tightening (rate hike) The policy rate is steady, so the tightening channel is dormant. A hike would fire it — watch it because it hits long-duration growth, long bonds, and gold first.
Growth acceleration (expansionary PMI) Manufacturing isn't both expanding and accelerating, so the growth-acceleration channel is dormant. A rising PMI back above 50 would fire it — it matters because it's the signal to rotate from defensives toward cyclicals.

Japan

No active mechanism this week — the standing read above carries the bloc.

What would change the read

Inflation surprise (upside) Core inflation is steady, so the upside-surprise channel is quiet. It would fire on a core reading ≥0.2pp above the prior — watch it because that is what forces a central bank to stay restrictive and pressures the longest-duration assets first.
Inflation surprise (downside / disinflation) Core inflation isn't cooling fast enough to trigger the disinflation channel. A fall of ≥0.2pp would fire it — worth watching because it is the cleanest tailwind for long-duration growth and government bonds.
Monetary easing (rate cut) The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.

The dataL3

United States

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.75	3.60	+0.15 ▲	2011-08-01
Core CPI	0.29	0.30	-0.01 ▬	2011-08-01
Core PCE	1.84	1.73	+0.11 ▲	2011-08-01
Policy rate	0.25	0.25	+0.00 ▬	2011-08-07
GDP	1.30	-0.10	+1.40 ▲	2011-07-29
PMI (mfg)	50.90	55.30	-4.40 ▼	2011-08-01
PMI (svc)	52.70	53.30	-0.60 ▼	2011-08-03
Unemployment	9.10	9.00	+0.10 ▬	2011-08-05
10Y yield	2.58	2.47	+0.11 ▲	2011-08-05
2Y yield	0.28	0.27	+0.01 ▬	2011-08-05
2s10s slope	2.30	2.20	+0.10 ▲	2011-08-05
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	6.40	5.50	+0.90 ▲	2011-07-09
Policy rate	n/a
GDP	9.50	9.70	-0.20 ▬	2011-07-13
PMI (mfg)	50.90	50.70	+0.20 ▬	2011-08-01
PMI (svc)	57.30	56.60	+0.70 ▲	2011-08-01
Unemployment	n/a
10Y yield	4.04	4.09	-0.05 ▬	2011-08-05
2Y yield	3.69	3.73	-0.04 ▬	2011-08-05
2s10s slope	0.35	0.36	-0.01 ▬	2011-08-05
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.50	2.70	-0.20 ▼	2011-07-29
Policy rate	1.50	1.50	+0.00 ▬	2011-08-04
GDP	-0.60	0.00	-0.60 ▼	2011-08-01
PMI (mfg)	50.40	50.40	+0.00 ▬	2011-08-01
PMI (svc)	51.60	51.40	+0.20 ▬	2011-08-03
Unemployment	9.90	9.90	+0.00 ▬	2011-08-01
10Y yield	4.20	4.60	-0.39 ▼	2011-08-01
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.40	-0.40	+0.00 ▬	2011-07-26
Core CPI	-0.80	-0.80	+0.00 ▬	2011-07-26
Policy rate	0.10	0.10	+0.00 ▬	2011-08-04
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.70	4.60	+0.10 ▲	2011-07-30
10Y yield	1.02	1.07	-0.05 ▼	2011-08-01
FX vs USD	n/a

Concept libraryL3

Terms marked ✓ are linked inline above — click any dotted term in the text to expand it in place.

2s10s: The gap between the 10-year and 2-year government bond yields. Positive = normal upward-sloping curve; negative ('inverted') = a classic late-cycle/recession warning.
PMI: Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity.
carry trade: Borrowing in a low-rate currency (long the yen's case) to buy higher-yielding assets elsewhere. It unwinds violently when the funding rate rises or the funding currency strengthens.
credit impulse: The change in the flow of new credit into an economy. A rising impulse front-runs stronger demand for commodities and cyclical goods, with a lag.
cyclicals: Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary.
defensives: Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows.
discount rate ✓: The rate used to convert a future cash flow into today's value. A higher discount rate makes far-off cash flows worth less now.
disinflation: Inflation that is still positive but falling (prices rising more slowly) — distinct from deflation, where prices actually fall.
duration: How sensitive an asset's price is to interest rates. 'Long-duration' assets (long bonds, fast-growing stocks whose profits are years away) move most when rates change.
net interest margin: The spread a bank earns between what it charges on loans and pays on deposits. Higher short rates / steeper curves tend to widen it.
nominal yield: The headline interest rate on a bond, before subtracting inflation.
policy rate: The interest rate a central bank sets directly (e.g. the Fed funds rate, the ECB deposit rate, China's LPR). It anchors all other rates.
rate path: The market's expectation of where the policy rate goes over the next year or two — not just today's level, but the whole expected trajectory.
real yield ✓: The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation.
term premium: The extra yield investors demand to hold a long bond instead of rolling short ones — compensation for tying money up and for issuance/inflation risk.