Macro Intelligence · Weekly · deep read

Macro Regime — 2022-W20

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Read at: thesis narrative mechanism data

↩ Home Macro index ← 2022-05 board

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

Standing macro backdropBORROWED

Borrowed from its month (2022-05); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2022-05	2022-04	Change
Core CPI	% MoM	0.53 2022-05-01	0.5 2022-04-01	→ 0.03
Core PCE	% YoY	5.18 2022-05-01	5.35 2022-04-01	▼ -0.17
CPI (YoY)	% YoY	8.54 2022-05-01	8.23 2022-04-01	▲ 0.31
FX vs USD	px	101.75 2022-05-31	102.96 2022-04-29	▼ -1.21
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	55.4 2022-05-02	57.1 2022-04-01	▼ -1.7
PMI (svc)	index	57.1 2022-05-04	58.3 2022-04-05	▼ -1.2
Policy rate	%	1 2022-05-31	0.5 2022-04-30	▲ 0.5
2s10s slope	pp	0.32 2022-05-31	0.19 2022-04-29	▲ 0.13
Unemployment	%	3.6 2022-05-01	3.7 2022-04-01	→ -0.1
10Y yield	%	2.85 2022-05-31	2.89 2022-04-29	→ -0.04
2Y yield	%	2.53 2022-05-31	2.7 2022-04-29	▼ -0.17

China

Indicator	Basis	2022-05	2022-04	Change
CPI (YoY)	% YoY	2.1 2022-05-11	1.5 2022-04-11	▲ 0.6
FX vs USD	px	6.66 2022-05-31	6.63 2022-04-29	→ 0.04
GDP	% YoY	not recorded
PMI (mfg)	index	49.6 2022-05-01	47.4 2022-04-01	▲ 2.2
PMI (svc)	index	47.8 2022-05-31	41.9 2022-04-30	▲ 5.9
Policy rate	% (1Y LPR)	3.7 2022-05-20	3.7 2022-04-20	→ 0
2s10s slope	pp	0.47 2022-05-31	0.49 2022-04-29	→ -0.02
Unemployment	%	5.9 2022-05-01	6.1 2022-04-01	▼ -0.2
10Y yield	%	2.74 2022-05-31	2.84 2022-04-29	▼ -0.1
2Y yield	%	2.27 2022-05-31	2.35 2022-04-29	▼ -0.08

Euro area

Indicator	Basis	2022-05	2022-04	Change
CPI (YoY)	% YoY	8.1 2022-05-31	7.5 2022-04-29	▲ 0.6
FX vs USD	px	1.08 2022-05-31	1.05 2022-04-29	→ 0.03
GDP	% YoY	0.8 2022-05-31	0.6 2022-04-29	→ 0.2
PMI (mfg)	index	54.4 2022-05-24	55.3 2022-04-22	▼ -0.9
PMI (svc)	index	56.3 2022-05-24	57.7 2022-04-22	▼ -1.4
Policy rate	%	not recorded
Unemployment	%	6.8 2022-05-03	—	—
10Y yield	%	1.87 2022-05-01	1.57 2022-04-01	▲ 0.31

Japan

Indicator	Basis	2022-05	2022-04	Change
Core CPI	% YoY	0.1 2022-05-20	-1.6 2022-04-22	▲ 1.7
CPI (YoY)	% YoY	2.5 2022-05-20	1.2 2022-04-22	▲ 1.3
FX vs USD	px	127.78 2022-05-31	130.81 2022-04-29	▼ -3.03
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	not recorded
Unemployment	%	2.5 2022-05-31	2.6 2022-04-26	→ -0.1
10Y yield	%	0.23 2022-05-01	0.21 2022-04-01	→ 0.02

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.

○ no change

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.

● 1 active

Euro area ⚠ stale

overheating / late-cycle

expansion · above target · on hold

● 1 active

Japan ⚠ stale

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.

● 1 active

Mechanisms & channelsL2

United States

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.

China

M13Contraction easing (sub-50 PMI, rising)

Trigger: pmi_mfg: 47.4 → 49.6 (+2.2)

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 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 cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary. and small-caps tend to lead off the low; defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows.' 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).

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: 1.56788 → 1.87413 (+0.306254)

⚠ Fired on a stale print: yield_10y as of 2022-05-01 (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 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

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

M1Inflation surprise (upside)

Trigger: core_cpi: -1.6 → 0.1 (+1.7)

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)	8.30	8.54	-0.24 ▼	2022-05-11
Core CPI	0.60	0.53	+0.07 ▬	2022-05-11
Core PCE	5.18	5.20	-0.02 ▬	2022-05-01
Policy rate	1.00	1.00	+0.00 ▬	2022-05-22
GDP	-1.40	0.60	-2.00 ▼	2022-04-28
PMI (mfg)	55.40	57.10	-1.70 ▼	2022-05-02
PMI (svc)	57.10	58.30	-1.20 ▼	2022-05-04
Unemployment	3.60	3.60	+0.00 ▬	2022-05-06
10Y yield	2.78	2.84	-0.06 ▼	2022-05-20
2Y yield	2.60	2.63	-0.03 ▬	2022-05-20
2s10s slope	0.18	0.21	-0.03 ▬	2022-05-20
FX vs USD	103.15	102.72	+0.43 ▬	2022-05-20

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.10	1.50	+0.60 ▲	2022-05-11
Policy rate	3.70	3.70	+0.00 ▬	2022-05-20
GDP	4.80	4.00	+0.80 ▲	2022-04-18
PMI (mfg)	49.60	47.40	+2.20 ▲	2022-05-01
PMI (svc)	41.90	48.40	-6.50 ▼	2022-04-30
Unemployment	5.90	6.10	-0.20 ▼	2022-05-01
10Y yield	2.79	2.78	+0.01 ▬	2022-05-20
2Y yield	2.27	2.25	+0.02 ▬	2022-05-20
2s10s slope	0.52	0.52	-0.00 ▬	2022-05-20
FX vs USD	6.71	6.75	-0.04 ▬	2022-05-20

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	7.40	7.50	-0.10 ▬	2022-05-18
Policy rate	0.00	0.00	+0.00 ▬	2022-04-14
GDP	0.60	0.60	+0.00 ▬	2022-05-18
PMI (mfg)	55.50	55.30	+0.20 ▬	2022-05-02
PMI (svc)	57.70	57.70	+0.00 ▬	2022-05-04
Unemployment	6.80	6.80	+0.00 ▬	2022-05-03
10Y yield	1.87	1.57	+0.31 ▲	2022-05-01 ⚠⚠
FX vs USD	1.06	1.05	+0.01 ▬	2022-05-20

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.50	1.20	+1.30 ▲	2022-05-20
Core CPI	0.10	-1.60	+1.70 ▲	2022-05-20
Policy rate	-0.10	-0.10	+0.00 ▬	2022-04-28
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.60	2.70	-0.10 ▼	2022-04-26
10Y yield	0.23	0.21	+0.02 ▬	2022-05-01 ⚠⚠
FX vs USD	127.83	127.91	-0.08 ▬	2022-05-20

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.