Macro Intelligence · Weekly · deep read

Macro Regime — 2020-W12

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US · China · EU · Japan · mechanism-first, taught

Read at: thesis narrative mechanism data

↩ Home Macro index ← 2020-03 board

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

Standing macro backdropBORROWED

Borrowed from its month (2020-03); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2020-03	2020-02	Change
Core CPI	% MoM	-0.12 2020-03-01	0.25 2020-02-01	▼ -0.37
Core PCE	% YoY	1.53 2020-03-01	1.7 2020-02-01	▼ -0.17
CPI (YoY)	% YoY	1.49 2020-03-01	2.34 2020-02-01	▼ -0.85
FX vs USD	px	99.05 2020-03-31	98.13 2020-02-28	▲ 0.92
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	50.1 2020-03-02	50.9 2020-02-03	▼ -0.8
PMI (svc)	index	57.3 2020-03-04	55.5 2020-02-05	▲ 1.8
Policy rate	%	0.25 2020-03-31	1.75 2020-02-29	▼ -1.5
2s10s slope	pp	0.47 2020-03-31	0.27 2020-02-28	▲ 0.2
Unemployment	%	4.4 2020-03-01	3.5 2020-02-01	▲ 0.9
10Y yield	%	0.7 2020-03-31	1.13 2020-02-28	▼ -0.43
2Y yield	%	0.23 2020-03-31	0.86 2020-02-28	▼ -0.63

China

Indicator	Basis	2020-03	2020-02	Change
CPI (YoY)	% YoY	5.2 2020-03-10	5.4 2020-02-10	▼ -0.2
FX vs USD	px	7.1 2020-03-31	7 2020-02-28	→ 0.1
GDP	% YoY	not recorded
PMI (mfg)	index	52 2020-03-01	35.7 2020-02-01	▲ 16.3
PMI (svc)	index	52.3 2020-03-31	29.6 2020-02-29	▲ 22.7
Policy rate	% (1Y LPR)	4.05 2020-03-20	4.05 2020-02-20	→ 0
2s10s slope	pp	0.68 2020-03-31	0.48 2020-02-28	▲ 0.2
Unemployment	%	5.9 2020-03-01	6.2 2020-02-01	▼ -0.3
10Y yield	%	2.59 2020-03-31	2.74 2020-02-28	▼ -0.15
2Y yield	%	1.91 2020-03-31	2.25 2020-02-28	▼ -0.35

Euro area

Indicator	Basis	2020-03	2020-02	Change
CPI (YoY)	% YoY	0.7 2020-03-31	1.4 2020-02-21	▼ -0.7
FX vs USD	px	1.1 2020-03-31	1.1 2020-02-28	→ 0
GDP	% YoY	0.5 2020-03-31	-1 2020-02-21	▲ 1.5
PMI (mfg)	index	44.8 2020-03-24	49.1 2020-02-21	▼ -4.3
PMI (svc)	index	28.4 2020-03-24	52.8 2020-02-21	▼ -24.4
Policy rate	%	0 2020-03-12	—	—
Unemployment	%	7.4 2020-03-03	—	—
10Y yield	%	0.37 2020-03-01	0.13 2020-02-01	▲ 0.24

Japan

Indicator	Basis	2020-03	2020-02	Change
Core CPI	% YoY	0.2 2020-03-19	0.4 2020-02-21	▼ -0.2
CPI (YoY)	% YoY	0.4 2020-03-19	0.7 2020-02-21	▼ -0.3
FX vs USD	px	108.04 2020-03-31	109.66 2020-02-28	▼ -1.62
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	-0.1 2020-03-16	—	—
Unemployment	%	2.4 2020-03-31	2.4 2020-02-28	→ 0
10Y yield	%	0.01 2020-03-01	-0.15 2020-02-01	▲ 0.16

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

overheating / late-cycle

expansion · 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

Euro area ⚠ stale

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.

● 1 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.

● 2 active

Mechanisms & channelsL2

United States

M1Inflation surprise (upside)

Trigger: core_cpi: -0.12 → 0.2 (+0.32)

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 yieldsreal yield — The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation. 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 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. 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.

China

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 35.7 → 52 (+16.3)

Manufacturing PMIPMI — Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity. is above 50 and rising.
Why: A reading above 50 means more firms report expanding activity than contracting; rising means the breadth of expansion is widening — a timely, forward-looking growth signal.
Earnings expectations broaden toward economically-sensitive sectors.
Why: Stronger activity feeds revenue and pricing power first in the parts of the market geared to the physical economy.
Cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary., small-caps, EM and commodities lead; defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows. lag.
Why: Capital rotates toward the cycle — industrials, materials, energy, smaller and more leveraged firms, and the commodities their activity consumes — while steady-demand defensives become relatively less attractive.

Helps
cyclicals (industrials, materials, energy)small-capsEM equitycommodities

Hurts
defensive sectors (staples, utilities)long government bonds

Caveat: If acceleration also stokes inflation fears, the bond-yield response can offset the equity benefit (good growth becomes 'too good'), especially late-cycle.

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

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 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).

Euro area

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 0.132263 → 0.372634 (+0.240372)

⚠ Fired on a stale print: yield_10y as of 2020-03-01 (21d 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 rate 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 yield 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

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

M2Inflation surprise (downside / disinflation)

Trigger: core_cpi: 0.4 → 0.2 (-0.2)

Core inflation falls more than the prior reading.
Why: A faster-than-expected cooling in the persistent part of inflation tells the market the central bank has more room to ease.
The market prices an earlier or deeper easing path.
Why: Lower inflation removes the reason to keep rates high, so traders pull forward expected cuts into the curve.
Real yields fall.
Why: The expected policy ratepolicy 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. drops while inflation expectations stay anchored, so the inflation-adjusted return demanded by lenders declines.
A lower discount rate re-rates long-duration assets upward; long bonds rally.
Why: Future cash flows are now discounted less harshly, lifting growth equities most; bond prices rise mechanically as their yields fall.

Helps
long-duration growth equitieslong-dated government bondsgoldrate-sensitive sectors (utilities, REITs)

Hurts
USD (vs easing-laggard peers)bank net-interest margins

Caveat: Misfires if disinflation is driven by demand collapse rather than supply normalization — then the growth scare dominates and risk assets fall despite lower yields.

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

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: -0.155 → 0.005 (+0.16)

⚠ Fired on a stale print: yield_10y as of 2020-03-01 (21d 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 rate 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 yield 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

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

The dataL3

United States

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.30	1.49	+0.81 ▲	2020-03-11
Core CPI	0.20	-0.12	+0.32 ▲	2020-03-11
Core PCE	1.53	1.60	-0.07 ▬	2020-03-01
Policy rate	0.25	0.25	+0.00 ▬	2020-03-22
GDP	2.10	2.10	+0.00 ▬	2020-02-27
PMI (mfg)	50.10	50.90	-0.80 ▼	2020-03-02
PMI (svc)	57.30	55.50	+1.80 ▲	2020-03-04
Unemployment	3.50	4.40	-0.90 ▼	2020-03-06
10Y yield	0.92	1.12	-0.20 ▼	2020-03-20
2Y yield	0.37	0.44	-0.07 ▼	2020-03-20
2s10s slope	0.55	0.68	-0.13 ▼	2020-03-20
FX vs USD	102.82	102.76	+0.06 ▬	2020-03-20

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	5.20	5.40	-0.20 ▼	2020-03-10
Policy rate	4.05	4.05	+0.00 ▬	2020-03-20
GDP	6.00	6.00	+0.00 ▬	2020-01-17
PMI (mfg)	52.00	35.70	+16.30 ▲	2020-03-01
PMI (svc)	29.60	54.10	-24.50 ▼	2020-02-29
Unemployment	5.90	6.20	-0.30 ▼	2020-03-01
10Y yield	2.68	2.73	-0.05 ▬	2020-03-20
2Y yield	2.17	2.20	-0.02 ▬	2020-03-20
2s10s slope	0.51	0.53	-0.02 ▬	2020-03-20
FX vs USD	7.11	7.05	+0.06 ▬	2020-03-20

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.20	1.20	+0.00 ▬	2020-03-18
Policy rate	0.00	0.00	+0.00 ▬	2020-03-12
GDP	0.20	0.20	+0.00 ▬	2020-03-18
PMI (mfg)	49.20	49.10	+0.10 ▬	2020-03-02
PMI (svc)	52.60	52.80	-0.20 ▬	2020-03-04
Unemployment	7.40	7.40	+0.00 ▬	2020-03-03
10Y yield	0.37	0.13	+0.24 ▲	2020-03-01 ⚠⚠
FX vs USD	1.07	1.10	-0.03 ▬	2020-03-20

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.40	0.70	-0.30 ▼	2020-03-19
Core CPI	0.20	0.40	-0.20 ▼	2020-03-19
Policy rate	-0.10	-0.10	+0.00 ▬	2020-03-16
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.40	2.20	+0.20 ▲	2020-02-28
10Y yield	0.01	-0.15	+0.16 ▲	2020-03-01 ⚠⚠
FX vs USD	111.29	108.36	+2.93 ▲	2020-03-20

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.