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Macro Regime — 2022-W22

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↩ Home Macro index ← 2022-06 board

Standing macro backdropBORROWED

Borrowed from its month (2022-06); 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	2022-06	2022-05	Change
Core CPI	% MoM	0.68 2022-06-01	0.53 2022-05-01	▲ 0.15
Core PCE	% YoY	5.32 2022-06-01	5.18 2022-05-01	▲ 0.14
CPI (YoY)	% YoY	8.98 2022-06-01	8.54 2022-05-01	▲ 0.44
FX vs USD	px	104.69 2022-06-30	101.75 2022-05-31	▲ 2.94
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	56.1 2022-06-01	55.4 2022-05-02	▲ 0.7
PMI (svc)	index	55.9 2022-06-03	57.1 2022-05-04	▼ -1.2
Policy rate	%	1.75 2022-06-30	1 2022-05-31	▲ 0.75
2s10s slope	pp	0.06 2022-06-30	0.32 2022-05-31	▼ -0.26
Unemployment	%	3.6 2022-06-01	3.6 2022-05-01	→ 0
10Y yield	%	2.98 2022-06-30	2.85 2022-05-31	▲ 0.13
2Y yield	%	2.92 2022-06-30	2.53 2022-05-31	▲ 0.39

China

Indicator	Basis	2022-06	2022-05	Change
CPI (YoY)	% YoY	2.1 2022-06-10	2.1 2022-05-11	→ 0
FX vs USD	px	6.7 2022-06-30	6.66 2022-05-31	→ 0.04
GDP	% YoY	not recorded
PMI (mfg)	index	50.2 2022-06-01	49.6 2022-05-01	▲ 0.6
PMI (svc)	index	54.7 2022-06-30	47.8 2022-05-31	▲ 6.9
Policy rate	% (1Y LPR)	3.7 2022-06-20	3.7 2022-05-20	→ 0
2s10s slope	pp	0.52 2022-06-30	0.47 2022-05-31	→ 0.04
Unemployment	%	5.5 2022-06-01	5.9 2022-05-01	▼ -0.4
10Y yield	%	2.82 2022-06-30	2.74 2022-05-31	▲ 0.08
2Y yield	%	2.3 2022-06-30	2.27 2022-05-31	→ 0.04

Euro area

Indicator	Basis	2022-06	2022-05	Change
CPI (YoY)	% YoY	8.1 2022-06-17	8.1 2022-05-31	→ 0
FX vs USD	px	1.04 2022-06-30	1.08 2022-05-31	→ -0.03
GDP	% YoY	0.8 2022-06-17	0.8 2022-05-31	→ 0
PMI (mfg)	index	52 2022-06-23	54.4 2022-05-24	▼ -2.4
PMI (svc)	index	52.8 2022-06-23	56.3 2022-05-24	▼ -3.5
Policy rate	%	0 2022-06-09	—	—
Unemployment	%	6.6 2022-06-30	6.8 2022-05-03	▼ -0.2
10Y yield	%	2.44 2022-06-01	1.87 2022-05-01	▲ 0.56

Japan

Indicator	Basis	2022-06	2022-05	Change
Core CPI	% YoY	0.2 2022-06-24	0.1 2022-05-20	→ 0.1
CPI (YoY)	% YoY	2.5 2022-06-24	2.5 2022-05-20	→ 0
FX vs USD	px	136.59 2022-06-30	127.78 2022-05-31	▲ 8.8
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	-0.1 2022-06-17	—	—
Unemployment	%	not recorded
10Y yield	%	0.23 2022-06-01	0.23 2022-05-01	→ -0.01

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.

● 1 active

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

overheating / late-cycle

expansion · above target · on hold

● 1 active

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.

● 1 active

Mechanisms & channelsL2

United States

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 55.4 → 56.1 (+0.7)

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

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: 49.6 → 50.2 (+0.6)

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).

Euro area

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 1.87413 → 2.43874 (+0.564613)

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)	8.98	8.30	+0.68 ▲	2022-06-01
Core CPI	0.68	0.60	+0.08 ▬	2022-06-01
Core PCE	5.32	4.90	+0.42 ▲	2022-06-01
Policy rate	1.00	1.00	+0.00 ▬	2022-06-05
GDP	-1.50	-1.40	-0.10 ▬	2022-05-26
PMI (mfg)	56.10	55.40	+0.70 ▲	2022-06-01
PMI (svc)	55.90	57.10	-1.20 ▼	2022-06-03
Unemployment	3.60	3.60	+0.00 ▬	2022-06-03
10Y yield	2.96	2.92	+0.04 ▬	2022-06-03
2Y yield	2.66	2.65	+0.01 ▬	2022-06-03
2s10s slope	0.30	0.27	+0.03 ▬	2022-06-03
FX vs USD	102.14	101.77	+0.37 ▬	2022-06-03

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)	50.20	49.60	+0.60 ▲	2022-06-01
PMI (svc)	47.80	41.90	+5.90 ▲	2022-05-31
Unemployment	5.50	5.90	-0.40 ▼	2022-06-01
10Y yield	2.76	2.76	+0.01 ▬	2022-06-02
2Y yield	2.28	2.28	+0.01 ▬	2022-06-02
2s10s slope	0.48	0.48	-0.00 ▬	2022-06-02
FX vs USD	6.66	6.69	-0.03 ▬	2022-06-03

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	8.10	7.40	+0.70 ▲	2022-05-31
Policy rate	0.00	0.00	+0.00 ▬	2022-04-14
GDP	0.80	0.60	+0.20 ▲	2022-05-31
PMI (mfg)	54.60	54.40	+0.20 ▬	2022-06-01
PMI (svc)	56.10	56.30	-0.20 ▬	2022-06-03
Unemployment	6.80	6.80	+0.00 ▬	2022-06-01
10Y yield	2.44	1.87	+0.56 ▲	2022-06-01
FX vs USD	1.08	1.07	+0.01 ▬	2022-06-03

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	2.50	2.60	-0.10 ▼	2022-05-31
10Y yield	0.23	0.23	-0.01 ▬	2022-06-01
FX vs USD	129.92	130.12	-0.20 ▬	2022-06-03

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.