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Macro Regime — 2025-W14

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Standing macro backdropBORROWED

Borrowed from its month (2025-04); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2025-04	2025-03	Change
Core CPI	% MoM	0.24 2025-04-01	0.07 2025-03-01	▲ 0.17
Core PCE	% YoY	2.61 2025-04-01	2.67 2025-03-01	→ -0.06
CPI (YoY)	% YoY	2.33 2025-04-01	2.38 2025-03-01	→ -0.05
FX vs USD	px	99.47 2025-04-30	104.21 2025-03-31	▼ -4.74
GDP	% QoQ ann.	3.8 2025-04-01	—	—
PMI (mfg)	index	49 2025-04-01	50.3 2025-03-03	▼ -1.3
PMI (svc)	index	50.8 2025-04-03	53.5 2025-03-05	▼ -2.7
Policy rate	%	4.5 2025-04-30	4.5 2025-03-31	→ 0
2s10s slope	pp	0.57 2025-04-30	0.34 2025-03-31	▲ 0.23
Unemployment	%	4.2 2025-04-01	4.2 2025-03-01	→ 0
10Y yield	%	4.17 2025-04-30	4.23 2025-03-31	▼ -0.06
2Y yield	%	3.6 2025-04-30	3.89 2025-03-31	▼ -0.29

China

Indicator	Basis	2025-04	2025-03	Change
CPI (YoY)	% YoY	-0.1 2025-04-10	-0.7 2025-03-09	▲ 0.6
FX vs USD	px	7.27 2025-04-30	7.26 2025-03-31	→ 0.01
GDP	% YoY	5.4 2025-04-16	—	—
PMI (mfg)	index	49 2025-04-01	50.5 2025-03-01	▼ -1.5
PMI (svc)	index	50.4 2025-04-30	50.8 2025-03-31	▼ -0.4
Policy rate	% (1Y LPR)	3.1 2025-04-21	3.1 2025-03-20	→ 0
2s10s slope	pp	0.17 2025-04-30	0.25 2025-03-31	▼ -0.07
Unemployment	%	5.1 2025-04-01	5.2 2025-03-01	→ -0.1
10Y yield	%	1.62 2025-04-30	1.81 2025-03-31	▼ -0.19
2Y yield	%	1.45 2025-04-30	1.57 2025-03-31	▼ -0.12

Euro area

Indicator	Basis	2025-04	2025-03	Change
CPI (YoY)	% YoY	2.2 2025-04-16	2.3 2025-03-19	→ -0.1
FX vs USD	px	1.14 2025-04-30	1.08 2025-03-31	→ 0.06
GDP	% YoY	0.6 2025-04-16	0.4 2025-03-19	→ 0.2
PMI (mfg)	index	48.7 2025-04-23	48.7 2025-03-24	→ 0
PMI (svc)	index	49.7 2025-04-23	50.4 2025-03-24	▼ -0.7
Policy rate	%	2.4 2025-04-17	2.65 2025-03-06	▼ -0.25
Unemployment	%	6.1 2025-04-01	6.2 2025-03-04	→ -0.1
10Y yield	%	3.1 2025-04-01	3.31 2025-03-01	▼ -0.22

Japan

Indicator	Basis	2025-04	2025-03	Change
Core CPI	% YoY	1.6 2025-04-18	1.5 2025-03-21	→ 0.1
CPI (YoY)	% YoY	3.6 2025-04-18	3.7 2025-03-21	→ -0.1
FX vs USD	px	142.3 2025-04-30	149.62 2025-03-31	▼ -7.32
GDP	% YoY	1.67 2025-04-01	—	—
PMI (mfg)		not recorded
Policy rate	%	not recorded
Unemployment	%	not recorded
10Y yield	%	1.31 2025-04-01	1.49 2025-03-01	▼ -0.17

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

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

China

deflation watch

stall · deflation risk · on hold

Activity is soft and inflation is at/below zero — the risk is entrenched deflation. Favors duration (long bonds) and quality; cyclicals struggle until policy eases decisively. The catalyst to watch is stimulus / a policy cut.

● 1 active

Euro area

stall-speed, at target

stall · at target · easing

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

Japan

overheating / late-cycle

unknown · 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

Mechanisms & channelsL2

United States

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 50.3 → 49 (-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).

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

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 50.5 → 49 (-1.5)

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

M3Monetary easing (rate cut)

Trigger: policy_rate: 2.9 → 2.65 (-0.25)

The central bank cuts its 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..
Why: The policy rate anchors the entire rate structure, so a cut lowers the risk-free baseline against which every asset is valued.
Discount ratesdiscount 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. fall across asset classes and liquidity expectations rise.
Why: A lower risk-free rate raises the present value of future cash flows everywhere, and a cut signals the bank will keep conditions loose.
Risk assets re-rate up; the currency softens.
Why: Cheaper money flows toward higher-returning assets, and a lower local rate narrows the yield advantage of holding the currency, so it weakens.
The weaker currency lifts exporters, commodities, gold, and EM.
Why: Commodities priced in the easing currency rise in that currency; exporters gain competitiveness; and EM borrowers with dollar debt benefit as the dollar softens.

Helps
equities (broadly)goldEM assetslong-duration bondscommodities

Hurts
the easing currencycash/money-market real yield

Caveat: If the cut is an emergency response to a fast-deteriorating outlook ('cutting into a recession'), equities can fall even as bonds rally — the growth signal outweighs the liquidity boost.

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

What would change the read

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.
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

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.

The dataL3

United States

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.33	2.80	-0.47 ▼	2025-04-01
Core CPI	0.24	0.20	+0.04 ▬	2025-04-01
Core PCE	2.61	2.80	-0.19 ▼	2025-04-01
Policy rate	4.50	4.50	+0.00 ▬	2025-04-06
GDP	3.80	2.40	+1.40 ▲	2025-04-01
PMI (mfg)	49.00	50.30	-1.30 ▼	2025-04-01
PMI (svc)	50.80	53.50	-2.70 ▼	2025-04-03
Unemployment	4.20	4.20	+0.00 ▬	2025-04-04
10Y yield	4.01	4.06	-0.05 ▬	2025-04-04
2Y yield	3.68	3.71	-0.03 ▬	2025-04-04
2s10s slope	0.33	0.35	-0.02 ▬	2025-04-04
FX vs USD	103.02	102.07	+0.95 ▲	2025-04-04

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.70	0.50	-1.20 ▼	2025-03-09
Policy rate	3.10	3.10	+0.00 ▬	2025-03-20
GDP	5.40	4.60	+0.80 ▲	2025-01-17
PMI (mfg)	49.00	50.50	-1.50 ▼	2025-04-01
PMI (svc)	50.80	50.40	+0.40 ▲	2025-03-31
Unemployment	5.10	5.20	-0.10 ▼	2025-04-01
10Y yield	1.72	1.79	-0.07 ▼	2025-04-03
2Y yield	1.49	1.56	-0.08 ▼	2025-04-03
2s10s slope	0.23	0.23	+0.01 ▬	2025-04-03
FX vs USD	7.27	7.27	+0.00 ▬	2025-04-04

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.20	2.30	-0.10 ▬	2025-04-01
Policy rate	2.65	2.90	-0.25 ▼	2025-03-06
GDP	0.60	0.40	+0.20 ▬	2025-04-01
PMI (mfg)	48.60	48.70	-0.10 ▬	2025-04-01
PMI (svc)	51.00	50.40	+0.60 ▲	2025-04-03
Unemployment	6.10	6.20	-0.10 ▼	2025-04-01
10Y yield	3.10	3.31	-0.22 ▼	2025-04-01
FX vs USD	1.10	1.09	+0.01 ▬	2025-04-04

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.70	4.00	-0.30 ▼	2025-03-21
Core CPI	1.50	1.50	+0.00 ▬	2025-03-21
Policy rate	0.50	0.50	+0.00 ▬	2025-03-19
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.50	2.50	+0.00 ▬	2025-03-04
10Y yield	1.31	1.49	-0.17 ▼	2025-04-01
FX vs USD	146.23	147.87	-1.64 ▼	2025-04-04

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.