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Macro Regime — 2015-W10

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Standing macro backdropBORROWED

Borrowed from its month (2015-03); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2015-03	2015-02	Change
Core CPI	% MoM	0.24 2015-03-01	0.15 2015-02-01	→ 0.09
Core PCE	% YoY	1.28 2015-03-01	1.28 2015-02-01	→ 0
CPI (YoY)	% YoY	-0.02 2015-03-01	-0.09 2015-02-01	→ 0.07
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	52.9 2015-03-02	53.5 2015-02-02	▼ -0.6
PMI (svc)	index	56.9 2015-03-04	56.7 2015-02-04	→ 0.2
Policy rate	%	0.25 2015-03-31	0.25 2015-02-28	→ 0
2s10s slope	pp	1.38 2015-03-31	1.37 2015-02-27	→ 0.01
Unemployment	%	5.4 2015-03-01	5.5 2015-02-01	→ -0.1
10Y yield	%	1.94 2015-03-31	2 2015-02-27	▼ -0.06
2Y yield	%	0.56 2015-03-31	0.63 2015-02-27	▼ -0.07

China

Indicator	Basis	2015-03	2015-02	Change
CPI (YoY)	% YoY	1.4 2015-03-10	0.8 2015-02-10	▲ 0.6
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.1 2015-03-01	49.9 2015-02-01	→ 0.2
PMI (svc)	index	53.9 2015-03-01	53.7 2015-02-01	→ 0.2
Policy rate	% (1Y LPR)	5.3 2015-03-31	5.51 2015-02-28	▼ -0.21
2s10s slope	pp	0.38 2015-03-31	0.27 2015-02-28	▲ 0.11
Unemployment	%	not recorded
10Y yield	%	3.65 2015-03-31	3.36 2015-02-28	▲ 0.29
2Y yield	%	3.27 2015-03-31	3.09 2015-02-28	▲ 0.18

Euro area

Indicator	Basis	2015-03	2015-02	Change
CPI (YoY)	% YoY	-0.1 2015-03-31	-0.6 2015-02-24	▲ 0.5
FX vs USD	px	not recorded
GDP	% YoY	0.6 2015-03-17	-1.6 2015-02-24	▲ 2.2
PMI (mfg)	index	51.9 2015-03-24	51.1 2015-02-20	▲ 0.8
PMI (svc)	index	54.3 2015-03-24	53.9 2015-02-20	▲ 0.4
Policy rate	%	0.05 2015-03-05	—	—
Unemployment	%	11.3 2015-03-31	—	—
10Y yield	%	0.95 2015-03-01	1.21 2015-02-01	▼ -0.26

Japan

Indicator	Basis	2015-03	2015-02	Change
Core CPI	% YoY	2 2015-03-28	2.1 2015-02-25	→ -0.1
CPI (YoY)	% YoY	2.2 2015-03-28	2.4 2015-02-25	▼ -0.2
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2015-03-17	0.1 2015-02-18	→ 0
Unemployment	%	3.6 2015-03-01	—	—
10Y yield	%	0.4 2015-03-01	0.33 2015-02-01	▲ 0.07

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

goldilocks / reflation

expansion · deflation risk · on hold

Improving growth with inflation at/below target — the benign mix. Cyclicals, small-caps and risk assets broadly tend to lead; long bonds lag as growth firms.

● 1 active

China

disinflationary stall

stall · below target · on hold

Sub-trend growth with low, easing inflation. Duration and quality tend to lead; cyclicals lag until growth re-accelerates. Policy easing is the usual circuit-breaker.

○ no change

Euro area

deflation watch

stall · 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

Japan

stall-speed, at target

unknown · 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

Mechanisms & channelsL2

United States

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 2.11 → 2.24 (+0.13)

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

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.

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)	-0.02	-0.10	+0.08 ▬	2015-03-01
Core CPI	0.24	0.20	+0.04 ▬	2015-03-01
Core PCE	1.30	1.28	+0.02 ▬	2015-03-02
Policy rate	0.25	0.25	+0.00 ▬	2015-03-08
GDP	2.20	2.60	-0.40 ▼	2015-02-27
PMI (mfg)	52.90	53.50	-0.60 ▼	2015-03-02
PMI (svc)	56.90	56.70	+0.20 ▬	2015-03-04
Unemployment	5.50	5.40	+0.10 ▬	2015-03-06
10Y yield	2.24	2.11	+0.13 ▲	2015-03-06
2Y yield	0.73	0.65	+0.08 ▲	2015-03-06
2s10s slope	1.51	1.46	+0.05 ▲	2015-03-06
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.80	1.50	-0.70 ▼	2015-02-10
Policy rate	5.30	5.30	+0.00 ▬	2015-03-06
GDP	7.30	7.30	+0.00 ▬	2015-01-20
PMI (mfg)	50.10	49.90	+0.20 ▬	2015-03-01
PMI (svc)	53.90	53.70	+0.20 ▬	2015-03-01
Unemployment	n/a
10Y yield	3.48	3.44	+0.04 ▬	2015-03-06
2Y yield	3.16	3.13	+0.04 ▬	2015-03-06
2s10s slope	0.31	0.31	+0.00 ▬	2015-03-06
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.30	-0.60	+0.30 ▲	2015-03-02
Policy rate	0.05	0.05	+0.00 ▬	2015-03-05
GDP	-1.60	-0.10	-1.50 ▼	2015-02-24
PMI (mfg)	51.00	51.10	-0.10 ▬	2015-03-02
PMI (svc)	53.70	53.90	-0.20 ▬	2015-03-04
Unemployment	11.20	11.40	-0.20 ▼	2015-03-02
10Y yield	0.95	1.21	-0.26 ▼	2015-03-01
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.40	2.40	+0.00 ▬	2015-02-25
Core CPI	2.10	2.10	+0.00 ▬	2015-02-25
Policy rate	0.10	0.10	+0.00 ▬	2015-02-18
GDP	n/a
PMI (mfg)	n/a
Unemployment	3.60	3.40	+0.20 ▲	2015-03-01
10Y yield	0.40	0.33	+0.07 ▲	2015-03-01
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.