Macro Intelligence · Weekly · deep read

Macro Regime — 2022-W09

→

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

Read at: thesis narrative mechanism data

↩ Home Macro index ← 2022-03 board

Standing macro backdropBORROWED

Borrowed from its month (2022-03); the weekly reads the standing object, it does not recompute the aggregate.

United States: overheating / late-cycle
China: disinflationary stall
Euro area: overheating / late-cycle
Japan: overheating / late-cycle

month aggregated actuals

United States

Indicator	Basis	2022-03	2022-02	Change
Core CPI	% MoM	0.27 2022-03-01	0.53 2022-02-01	▼ -0.26
Core PCE	% YoY	5.59 2022-03-01	5.6 2022-02-01	→ -0.01
CPI (YoY)	% YoY	8.57 2022-03-01	7.94 2022-02-01	▲ 0.63
FX vs USD	px	98.31 2022-03-31	96.71 2022-02-28	▲ 1.6
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	58.6 2022-03-01	57.6 2022-02-01	▲ 1
PMI (svc)	index	56.5 2022-03-03	59.9 2022-02-03	▼ -3.4
Policy rate	%	0.5 2022-03-31	0.25 2022-02-28	▲ 0.25
2s10s slope	pp	0.04 2022-03-31	0.39 2022-02-28	▼ -0.35
Unemployment	%	3.7 2022-03-01	3.9 2022-02-01	▼ -0.2
10Y yield	%	2.32 2022-03-31	1.83 2022-02-28	▲ 0.49
2Y yield	%	2.28 2022-03-31	1.44 2022-02-28	▲ 0.84

China

Indicator	Basis	2022-03	2022-02	Change
CPI (YoY)	% YoY	0.9 2022-03-09	0.9 2022-02-16	→ 0
FX vs USD	px	6.35 2022-03-31	6.32 2022-02-28	→ 0.03
GDP	% YoY	not recorded
PMI (mfg)	index	49.5 2022-03-01	50.2 2022-02-01	▼ -0.7
PMI (svc)	index	48.4 2022-03-31	—	—
Policy rate	% (1Y LPR)	3.7 2022-03-21	3.7 2022-02-21	→ 0
2s10s slope	pp	0.48 2022-03-31	0.52 2022-02-28	→ -0.04
Unemployment	%	5.8 2022-03-01	5.5 2022-02-01	▲ 0.3
10Y yield	%	2.79 2022-03-31	2.77 2022-02-28	→ 0.01
2Y yield	%	2.31 2022-03-31	2.26 2022-02-28	▲ 0.05

Euro area

Indicator	Basis	2022-03	2022-02	Change
CPI (YoY)	% YoY	5.9 2022-03-17	5.1 2022-02-23	▲ 0.8
FX vs USD	px	1.12 2022-03-31	1.12 2022-02-28	→ -0
GDP	% YoY	0.9 2022-03-17	0.3 2022-02-23	▲ 0.6
PMI (mfg)	index	57 2022-03-24	58.4 2022-02-21	▼ -1.4
PMI (svc)	index	54.8 2022-03-24	55.8 2022-02-21	▼ -1
Policy rate	%	0 2022-03-10	0 2022-02-03	→ 0
Unemployment	%	6.8 2022-03-31	7 2022-02-01	▼ -0.2
10Y yield	%	1.05 2022-03-01	0.94 2022-02-01	▲ 0.11

Japan

Indicator	Basis	2022-03	2022-02	Change
Core CPI	% YoY	2.1 2022-03-24	-1.9 2022-02-18	▲ 4
CPI (YoY)	% YoY	3.3 2022-03-24	0.5 2022-02-18	▲ 2.8
FX vs USD	px	122.02 2022-03-31	115.58 2022-02-28	▲ 6.44
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	-0.1 2022-03-18	—	—
Unemployment	%	2.7 2022-03-29	2.7 2022-02-01	→ 0
10Y yield	%	0.21 2022-03-01	0.18 2022-02-01	→ 0.03

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

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.

● 2 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.

● 1 active

Euro area

overheating / late-cycle

expansion · above target · on hold

● 1 active

Japan

disinflationary stall

unknown · 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

Mechanisms & channelsL2

United States

M2Inflation surprise (downside / disinflation)

Trigger: core_cpi: 0.6 → 0.27 (-0.33)

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).

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 57.6 → 58.6 (+1)

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).

China

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 50.2 → 49.5 (-0.7)

Manufacturing PMI 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 defensives 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.
Cyclicals, 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

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

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 0.944138 → 1.05349 (+0.109349)

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: -1.3 → -1.9 (-0.6)

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 rate 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).

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)	8.57	7.50	+1.07 ▲	2022-03-01
Core CPI	0.27	0.60	-0.33 ▼	2022-03-01
Core PCE	5.59	5.20	+0.39 ▲	2022-03-01
Policy rate	0.25	0.25	+0.00 ▬	2022-03-06
GDP	7.00	6.90	+0.10 ▬	2022-02-24
PMI (mfg)	58.60	57.60	+1.00 ▲	2022-03-01
PMI (svc)	56.50	59.90	-3.40 ▼	2022-03-03
Unemployment	3.80	3.70	+0.10 ▬	2022-03-04
10Y yield	1.74	1.86	-0.12 ▼	2022-03-04
2Y yield	1.50	1.53	-0.03 ▬	2022-03-04
2s10s slope	0.24	0.33	-0.09 ▼	2022-03-04
FX vs USD	98.65	97.79	+0.86 ▲	2022-03-04

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.90	1.50	-0.60 ▼	2022-02-16
Policy rate	3.70	3.70	+0.00 ▬	2022-02-21
GDP	4.00	4.90	-0.90 ▼	2022-01-17
PMI (mfg)	49.50	50.20	-0.70 ▼	2022-03-01
PMI (svc)	51.60	51.10	+0.50 ▲	2022-03-01
Unemployment	5.80	5.50	+0.30 ▲	2022-03-01
10Y yield	2.81	2.83	-0.02 ▬	2022-03-04
2Y yield	2.30	2.31	-0.01 ▬	2022-03-04
2s10s slope	0.52	0.52	-0.01 ▬	2022-03-04
FX vs USD	6.32	6.32	-0.00 ▬	2022-03-04

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	5.80	5.10	+0.70 ▲	2022-03-02
Policy rate	0.00	0.00	+0.00 ▬	2022-02-03
GDP	0.90	0.30	+0.60 ▲	2022-03-02
PMI (mfg)	58.20	58.40	-0.20 ▬	2022-03-01
PMI (svc)	55.50	55.80	-0.30 ▬	2022-03-03
Unemployment	6.80	7.00	-0.20 ▼	2022-03-03
10Y yield	1.05	0.94	+0.11 ▲	2022-03-01
FX vs USD	1.11	1.11	-0.00 ▬	2022-03-04

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.50	0.80	-0.30 ▼	2022-02-18
Core CPI	-1.90	-1.30	-0.60 ▼	2022-02-18
Policy rate	-0.10	-0.10	+0.00 ▬	2022-01-18
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.80	2.70	+0.10 ▬	2022-03-04
10Y yield	0.21	0.18	+0.03 ▬	2022-03-01
FX vs USD	115.47	115.52	-0.04 ▬	2022-03-04

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.