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Macro Regime — 2013-W26

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↩ Home Macro index ← 2013-06 board

⚠ 2 very-stale + 0 stale series across the four blocs — flagged inline.

Standing macro backdropBORROWED

Borrowed from its month (2013-06); the weekly reads the standing object, it does not recompute the aggregate.

United States: stall-speed, at target
China: stall-speed, at target
Euro area: stall-speed, at target
Japan: deflation watch

month aggregated actuals

United States

Indicator	Basis	2013-06	2013-05	Change
Core CPI	% MoM	0.15 2013-06-01	0.07 2013-05-01	→ 0.08
Core PCE	% YoY	1.46 2013-06-01	1.39 2013-05-01	→ 0.07
CPI (YoY)	% YoY	1.72 2013-06-01	1.39 2013-05-01	▲ 0.33
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	49 2013-06-03	50.7 2013-05-01	▼ -1.7
PMI (svc)	index	53.7 2013-06-05	53.1 2013-05-03	▲ 0.6
Policy rate	%	0.25 2013-06-30	0.25 2013-05-31	→ 0
2s10s slope	pp	2.16 2013-06-28	1.86 2013-05-31	▲ 0.3
Unemployment	%	7.5 2013-06-01	7.5 2013-05-01	→ 0
10Y yield	%	2.52 2013-06-28	2.16 2013-05-31	▲ 0.36
2Y yield	%	0.36 2013-06-28	0.3 2013-05-31	▲ 0.06

China

Indicator	Basis	2013-06	2013-05	Change
CPI (YoY)	% YoY	2.1 2013-06-09	2.4 2013-05-09	▼ -0.3
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.1 2013-06-01	50.8 2013-05-01	▼ -0.7
PMI (svc)	index	54.3 2013-06-03	54.5 2013-05-03	→ -0.2
Policy rate	% (1Y LPR)	not recorded
2s10s slope	pp	0.29 2013-06-28	0.39 2013-05-31	▼ -0.1
Unemployment	%	not recorded
10Y yield	%	3.51 2013-06-28	3.44 2013-05-31	▲ 0.07
2Y yield	%	3.22 2013-06-28	3.05 2013-05-31	▲ 0.17

Euro area

Indicator	Basis	2013-06	2013-05	Change
CPI (YoY)	% YoY	1.4 2013-06-14	1.4 2013-05-31	→ 0
FX vs USD	px	not recorded
GDP	% YoY	0.1 2013-06-14	-0.1 2013-05-01	→ 0.2
PMI (mfg)	index	48.7 2013-06-20	47.8 2013-05-23	▲ 0.9
PMI (svc)	index	48.6 2013-06-20	47.5 2013-05-23	▲ 1.1
Policy rate	%	0.5 2013-06-06	0.5 2013-05-02	→ 0
Unemployment	%	not recorded
10Y yield	%	3.07 2013-06-01	2.68 2013-05-01	▲ 0.39

Japan

Indicator	Basis	2013-06	2013-05	Change
Core CPI	% YoY	-0.4 2013-06-25	-0.6 2013-05-26	▲ 0.2
CPI (YoY)	% YoY	-0.3 2013-06-25	-0.7 2013-05-26	▲ 0.4
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2013-06-11	0.1 2013-05-22	→ 0
Unemployment	%	4.1 2013-06-29	4.1 2013-05-30	→ 0
10Y yield	%	0.82 2013-06-01	0.88 2013-05-01	▼ -0.06

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

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.

● 1 active

China

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

Euro area ⚠ stale

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.

● 2 active

Japan ⚠ stale

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.

● 1 active

Mechanisms & channelsL2

United States

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 50.7 → 49 (-1.7)

Manufacturing PMIPMI — Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity. is below 50 and still falling.
Why: Below 50 means more firms are contracting than expanding; *falling* means the contraction is deepening, not bottoming — that combination is what leads earnings revisions down.
Investors rotate toward defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows. and government bonds.
Why: When growth is deteriorating, steady-demand sectors (staples, utilities, healthcare) hold earnings better, and government bonds act as a hedge that rallies if the slowdown deepens further.
Cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary., small-caps, EM and industrial commodities underperform.
Why: These are geared to the physical cycle and to leverage, so worsening activity hits their earnings and risk appetite hardest; commodity demand softens with industrial output.

Helps
defensive sectors (staples, utilities, healthcare)long government bondsquality/large-cap

Hurts
cyclicalssmall-capsEM equityindustrial commodities

Caveat: A shallow dip just below 50 that quickly reverses ('soft patch') doesn't trigger the full defensive rotation; the level must persist.

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

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 2.68456 → 3.06964 (+0.385077)

⚠ Fired on a stale print: yield_10y as of 2013-06-01 (29d old). The change may predate current conditions — treat as provisional.

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).

M13Contraction easing (sub-50 PMI, rising)

Trigger: pmi_mfg: 48.3 → 48.7 (+0.4)

Manufacturing PMI is below 50 but rising.
Why: Activity is still contracting in absolute terms (below 50), but the rate of contraction is easing — the second derivative has turned up, which historically clusters near cyclical lows.
Forward-looking investors start to price the trough.
Why: Markets discount the turn before it completes; an improving-but-sub-50 PMI often coincides with the low in cyclical risk assets, well before the PMI itself crosses back above 50.
Early-cycle cyclicals and small-caps tend to lead off the low; defensives' relative edge fades.
Why: The names most beaten down in the contraction have the most operating leverage to even a marginal improvement, so they re-rate first when the deterioration stops.

Helps
early-cycle cyclicalssmall-capsEM equity

Hurts
defensives (relative)long government bonds (if the recovery firms)

Caveat: A one-month uptick that doesn't persist is a head-fake; the turn needs follow-through, and a sub-50 level still means activity is contracting in absolute terms — this is an inflection signal, not an all-clear.

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

Japan

M1Inflation surprise (upside)

Trigger: core_cpi: -0.6 → -0.4 (+0.2)

Core inflation comes in higher than the prior reading.
Why: Core strips out food and energy, so a move in it signals persistent, broad price pressure rather than a one-off in volatile items — the kind a central bank reacts to.
The market reprices the policy-rate path higher.
Why: If inflation is stickier than thought, the central bank must keep rates higher for longer to cool it; traders bake that expectation into the whole rate curve immediately, before any actual hike.
Real yields rise, not just nominal yieldsnominal yield — The headline interest rate on a bond, before subtracting inflation..
Why: The inflation is already in the print, so the jump in nominal yields isn't just compensating for higher inflation — it's a genuine rise in the inflation-adjusted return demanded by lenders.
A higher real yield is a higher discount rate on future cash flows.
Why: Money earned years from now is discounted back to today at the real rate; when that rate rises, distant cash flows shrink in present-value terms more than near ones.
Long-duration growth equities de-rate hardest; banks and value hold up; the currency firms.
Why: Growth stocks are valued mostly on far-future profits, so a higher discount rate hits them most. Banks earn more as rates rise (wider margins), and value/cyclical earnings sit nearer in time. Higher local rates also pull in foreign capital, lifting the currency.

Helps
financialsvalueUSDshort-duration bonds

Hurts
long-duration growth equitieslong-dated government bondsgold (in real terms)

Caveat: Misfires if the print is read as one-off/transitory, or if growth is simultaneously rolling over (a stagflation mix), where cyclicals don't get the usual lift.

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

What would change the read

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.
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.

The dataL3

United States

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.40	1.72	-0.32 ▼	2013-06-14
Core CPI	0.20	0.15	+0.05 ▬	2013-06-18
Core PCE	1.46	1.39	+0.07 ▬	2013-06-01
Policy rate	0.25	0.25	+0.00 ▬	2013-06-30
GDP	1.80	2.40	-0.60 ▼	2013-06-26
PMI (mfg)	49.00	50.70	-1.70 ▼	2013-06-03
PMI (svc)	53.70	53.10	+0.60 ▲	2013-06-05
Unemployment	7.60	7.50	+0.10 ▬	2013-06-07
10Y yield	2.52	2.49	+0.03 ▬	2013-06-28
2Y yield	0.36	0.36	+0.00 ▬	2013-06-28
2s10s slope	2.16	2.13	+0.03 ▬	2013-06-28
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.10	2.40	-0.30 ▼	2013-06-09
Policy rate	n/a
GDP	7.70	7.90	-0.20 ▼	2013-04-15
PMI (mfg)	50.10	50.80	-0.70 ▼	2013-06-01
PMI (svc)	54.30	54.50	-0.20 ▬	2013-06-03
Unemployment	n/a
10Y yield	3.51	3.52	-0.01 ▬	2013-06-28
2Y yield	3.22	3.38	-0.16 ▼	2013-06-28
2s10s slope	0.29	0.15	+0.15 ▲	2013-06-28
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.40	1.40	+0.00 ▬	2013-06-14
Policy rate	0.50	0.50	+0.00 ▬	2013-06-06
GDP	0.10	-0.10	+0.20 ▬	2013-06-14
PMI (mfg)	48.70	48.30	+0.40 ▲	2013-06-20
PMI (svc)	48.60	47.20	+1.40 ▲	2013-06-20
Unemployment	12.20	12.10	+0.10 ▬	2013-05-31
10Y yield	3.07	2.68	+0.39 ▲	2013-06-01 ⚠⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.30	-0.70	+0.40 ▲	2013-06-25
Core CPI	-0.40	-0.60	+0.20 ▲	2013-06-25
Policy rate	0.10	0.10	+0.00 ▬	2013-06-11
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.10	4.10	+0.00 ▬	2013-06-29
10Y yield	0.82	0.88	-0.06 ▼	2013-06-01 ⚠⚠
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.