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

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 49.2 → 50.1 (+0.9)

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

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 58.3 → 58.6 (+0.3)

Manufacturing PMI 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.
Cyclicals, small-caps, EM and commodities lead; defensives 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).

Japan

M2Inflation surprise (downside / disinflation)

Trigger: core_cpi: -0.8 → -1.2 (-0.4)

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

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.
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)	6.20	6.90	-0.70 ▼	2021-11-10
Core CPI	0.60	0.62	-0.02 ▬	2021-11-10
Core PCE	4.10	4.89	-0.79 ▼	2021-11-24
Policy rate	0.25	0.25	+0.00 ▬	2021-11-28
GDP	2.10	2.00	+0.10 ▬	2021-11-24
PMI (mfg)	60.80	61.10	-0.30 ▼	2021-11-01
PMI (svc)	66.70	61.90	+4.80 ▲	2021-11-03
Unemployment	4.60	4.10	+0.50 ▲	2021-11-05
10Y yield	1.48	1.64	-0.16 ▼	2021-11-26
2Y yield	0.50	0.64	-0.14 ▼	2021-11-26
2s10s slope	0.98	1.00	-0.02 ▬	2021-11-26
FX vs USD	96.09	96.84	-0.75 ▼	2021-11-26

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.50	0.70	+0.80 ▲	2021-11-10
Policy rate	3.85	3.85	+0.00 ▬	2021-11-22
GDP	4.90	7.90	-3.00 ▼	2021-10-18
PMI (mfg)	50.10	49.20	+0.90 ▲	2021-11-01
PMI (svc)	52.40	53.20	-0.80 ▼	2021-10-31
Unemployment	5.00	4.90	+0.10 ▬	2021-11-01
10Y yield	2.82	2.85	-0.04 ▬	2021-11-26
2Y yield	2.47	2.49	-0.02 ▬	2021-11-26
2s10s slope	0.35	0.36	-0.01 ▬	2021-11-26
FX vs USD	6.39	6.39	-0.01 ▬	2021-11-26

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	4.10	4.10	+0.00 ▬	2021-11-17
Policy rate	0.00	0.00	+0.00 ▬	2021-10-28
GDP	0.80	0.80	+0.00 ▬	2021-11-17
PMI (mfg)	58.60	58.30	+0.30 ▲	2021-11-23
PMI (svc)	56.60	54.60	+2.00 ▲	2021-11-23
Unemployment	7.40	7.50	-0.10 ▬	2021-11-03
10Y yield	0.31	0.35	-0.04 ▬	2021-11-01 ⚠⚠
FX vs USD	1.12	1.12	+0.00 ▬	2021-11-26

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.10	0.20	-0.10 ▬	2021-11-19
Core CPI	-1.20	-0.80	-0.40 ▼	2021-11-19
Policy rate	-0.10	-0.10	+0.00 ▬	2021-10-28
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.80	2.80	+0.00 ▬	2021-10-29
10Y yield	0.05	0.10	-0.04 ▬	2021-11-01 ⚠⚠
FX vs USD	115.07	115.41	-0.34 ▬	2021-11-26

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.