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Macro Regime — 2024-W11

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↩ Home Macro index ← 2024-03 board

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

Standing macro backdropBORROWED

Borrowed from its month (2024-03); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2024-03	2024-02	Change
Core CPI	% MoM	0.39 2024-03-01	0.4 2024-02-01	→ -0.01
Core PCE	% YoY	3.12 2024-03-01	3.06 2024-02-01	→ 0.06
CPI (YoY)	% YoY	3.49 2024-03-01	3.16 2024-02-01	▲ 0.33
FX vs USD	px	104.55 2024-03-28	104.16 2024-02-29	→ 0.39
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	47.8 2024-03-01	49.1 2024-02-01	▼ -1.3
PMI (svc)	index	52.6 2024-03-05	53.4 2024-02-05	▼ -0.8
Policy rate	%	5.5 2024-03-31	5.5 2024-02-29	→ 0
2s10s slope	pp	-0.39 2024-03-28	-0.39 2024-02-29	→ 0
Unemployment	%	3.9 2024-03-01	3.9 2024-02-01	→ 0
10Y yield	%	4.2 2024-03-28	4.25 2024-02-29	→ -0.05
2Y yield	%	4.59 2024-03-28	4.64 2024-02-29	→ -0.05

China

Indicator	Basis	2024-03	2024-02	Change
CPI (YoY)	% YoY	0.7 2024-03-09	-0.8 2024-02-08	▲ 1.5
FX vs USD	px	7.23 2024-03-29	7.2 2024-02-29	→ 0.03
GDP	% YoY	not recorded
PMI (mfg)	index	50.8 2024-03-01	49.1 2024-02-01	▲ 1.7
PMI (svc)	index	53 2024-03-31	—	—
Policy rate	% (1Y LPR)	3.45 2024-03-20	3.45 2024-02-20	→ 0
2s10s slope	pp	0.39 2024-03-29	0.28 2024-02-29	▲ 0.1
Unemployment	%	5.2 2024-03-01	5.3 2024-02-01	→ -0.1
10Y yield	%	2.29 2024-03-29	2.34 2024-02-29	→ -0.05
2Y yield	%	1.9 2024-03-29	2.05 2024-02-29	▼ -0.15

Euro area

Indicator	Basis	2024-03	2024-02	Change
CPI (YoY)	% YoY	2.6 2024-03-18	2.8 2024-02-22	▼ -0.2
FX vs USD	px	1.08 2024-03-29	1.08 2024-02-29	→ -0
GDP	% YoY	0.6 2024-03-18	-0.4 2024-02-22	▲ 1
PMI (mfg)	index	45.7 2024-03-21	46.1 2024-02-22	▼ -0.4
PMI (svc)	index	51.1 2024-03-21	50 2024-02-22	▲ 1.1
Policy rate	%	4.5 2024-03-07	—	—
Unemployment	%	6.4 2024-03-01	6.4 2024-02-01	→ 0
10Y yield	%	2.95 2024-03-01	3.03 2024-02-01	▼ -0.07

Japan

Indicator	Basis	2024-03	2024-02	Change
Core CPI	% YoY	2.5 2024-03-22	2.6 2024-02-27	→ -0.1
CPI (YoY)	% YoY	2.8 2024-03-22	2.2 2024-02-27	▲ 0.6
FX vs USD	px	151.44 2024-03-29	150.66 2024-02-29	▲ 0.78
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2024-03-19	—	—
Unemployment	%	2.6 2024-03-29	—	—
10Y yield	%	0.72 2024-03-01	0.71 2024-02-01	→ 0.01

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

stagflationary

contraction · above target · on hold

Contracting activity *and* above-target inflation — the hardest mix: the central bank can't ease freely. Real assets, energy and value tend to hold up better than long-duration growth and bonds.

● 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 ⚠ stale

disinflationary stall

contraction · at 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

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

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 49.1 → 47.8 (-1.3)

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 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 defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows. 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.
Cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary., 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).

M10Yield-curve inversion (2s10s < 0)

Trigger: slope_2s10s: -0.39 → -0.41 (-0.02)

The 10-year yield falls below the 2-year (2s10s2s10s — 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. inverts).
Why: Normally longer bonds yield more; inversion means the market expects policy ratespolicy 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. to be lower in the future than now — i.e. it expects cuts, usually because growth is set to weaken.
Bank lending margins compress.
Why: Banks borrow short and lend long; when long rates sit below short rates, the spread they earn (net interest marginnet 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.) is squeezed, discouraging lending.
Capital rotates toward defensives and durationduration — 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. as the cycle turns.
Why: An inverted curve is a historically reliable late-cycle warning, so investors position ahead of a slowdown — favoring steady-demand defensives and long bonds that rally when cuts arrive.

Helps
long-duration bonds (as the turn approaches)defensivesquality

Hurts
banks (margin compression)cyclicalssmall-caps

Caveat: Inversion has long and variable lead times to any actual downturn; it's a regime warning, not a timing signal, and can persist for months while risk assets keep rising.

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

China

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 49.1 → 50.8 (+1.7)

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

M13Contraction easing (sub-50 PMI, rising)

Trigger: pmi_mfg: 46.1 → 46.5 (+0.4)

Manufacturing PMI 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 cyclicals and small-caps tend to lead off the low; defensives' 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.

Japan

M2Inflation surprise (downside / disinflation)

Trigger: core_cpi: 2.8 → 2.6 (-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 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 rate 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)	3.20	3.49	-0.29 ▼	2024-03-12
Core CPI	0.40	0.39	+0.01 ▬	2024-03-12
Core PCE	3.12	2.80	+0.32 ▲	2024-03-01
Policy rate	5.50	5.50	+0.00 ▬	2024-03-17
GDP	3.20	3.30	-0.10 ▬	2024-02-28
PMI (mfg)	47.80	49.10	-1.30 ▼	2024-03-01
PMI (svc)	52.60	53.40	-0.80 ▼	2024-03-05
Unemployment	3.90	3.90	+0.00 ▬	2024-03-08
10Y yield	4.31	4.29	+0.02 ▬	2024-03-15
2Y yield	4.72	4.68	+0.04 ▬	2024-03-15
2s10s slope	-0.41	-0.39	-0.02 ▬	2024-03-15
FX vs USD	103.43	103.36	+0.07 ▬	2024-03-15

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.70	-0.80	+1.50 ▲	2024-03-09
Policy rate	3.45	3.45	+0.00 ▬	2024-02-20
GDP	5.20	4.90	+0.30 ▲	2024-01-17
PMI (mfg)	50.80	49.10	+1.70 ▲	2024-03-01
PMI (svc)	51.40	50.70	+0.70 ▲	2024-03-01
Unemployment	5.20	5.30	-0.10 ▬	2024-03-01
10Y yield	2.32	2.34	-0.02 ▬	2024-03-15
2Y yield	2.08	2.10	-0.02 ▬	2024-03-15
2s10s slope	0.24	0.24	-0.00 ▬	2024-03-15
FX vs USD	7.19	7.19	+0.01 ▬	2024-03-15

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.60	2.80	-0.20 ▼	2024-03-01
Policy rate	4.50	4.50	+0.00 ▬	2024-03-07
GDP	0.60	-0.40	+1.00 ▲	2024-03-01
PMI (mfg)	46.50	46.10	+0.40 ▲	2024-03-01
PMI (svc)	50.20	50.00	+0.20 ▬	2024-03-05
Unemployment	6.40	6.40	+0.00 ▬	2024-03-01
10Y yield	2.95	3.03	-0.07 ▼	2024-03-01 ⚠⚠
FX vs USD	1.09	1.10	-0.01 ▬	2024-03-15

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.20	2.60	-0.40 ▼	2024-02-27
Core CPI	2.60	2.80	-0.20 ▼	2024-02-27
Policy rate	-0.10	-0.10	+0.00 ▬	2024-01-23
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.50	2.50	+0.00 ▬	2024-03-01
10Y yield	0.72	0.71	+0.01 ▬	2024-03-01 ⚠⚠
FX vs USD	148.30	147.62	+0.68 ▲	2024-03-15

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.