Gold, Energy, Commodities
Equities, Commodities
Bonds, Cash, Defensive
Tech, Growth, Bonds
The macro regime is determined by two forces: growth (measured by NFP employment data) and inflation (CPI YoY). In Expansion (growth up, inflation up), equities and commodities perform best. In Reflation (growth up, inflation down), tech, growth stocks and bonds outperform. In Stagnation (growth down, inflation up), gold, energy and cash are defensive. In Slowdown (growth down, inflation down), bonds and defensive sectors lead. The timeline shows how the regime has shifted over the past 36 months.
The Phillips Curve describes the inverse relationship between inflation and unemployment: when inflation is high, unemployment tends to be low, and vice versa. This chart tracks the percentile rank of both metrics over a 52-month window. When Inflation Rank is high (above 80) and Unemployment Rank is low (below 20), the Fed is under pressure to hike rates — bearish for equities and bonds. When Inflation Rank is low and Unemployment Rank is high, the Fed has room to cut — bullish for risk assets. The crossover between the two lines often signals a regime shift. Watch for divergences: when the lines move in the same direction, the historical inverse relationship is breaking down.
CPI measures price changes in a fixed basket of consumer goods. Core CPI excludes food and energy (volatile items) for a cleaner trend. PCE is the Fed's preferred inflation gauge — it uses variable weighting and broader coverage. When CPI and PCE diverge, PCE matters more for Fed policy. PPI measures producer prices — it's a leading indicator since producer cost increases eventually pass through to consumers.
NFP (Non-Farm Payrolls) shows monthly job creation — positive NFP means economic growth. Unemployment Rate is a lagging indicator — it confirms what has already happened. Initial Jobless Claims (ICSA) is a leading indicator — rising claims signal economic deterioration before other data catches up. JOLTS (Job Openings) measures labor demand — falling openings precede rising unemployment. When the focus is on inflation, watch CPI/PCE. When the focus shifts to employment, these labor metrics become the primary market movers.
NFP (Non-Farm Payrolls) shows monthly job creation — positive NFP means economic growth. Unemployment Rate is a lagging indicator — it confirms what has already happened. Initial Jobless Claims (ICSA) is a leading indicator — rising claims signal economic deterioration before other data catches up. JOLTS (Job Openings) measures labor demand — falling openings precede rising unemployment. When the focus is on inflation, watch CPI/PCE. When the focus shifts to employment, these labor metrics become the primary market movers.
NFP (Non-Farm Payrolls) shows monthly job creation — positive NFP means economic growth. Unemployment Rate is a lagging indicator — it confirms what has already happened. Initial Jobless Claims (ICSA) is a leading indicator — rising claims signal economic deterioration before other data catches up. JOLTS (Job Openings) measures labor demand — falling openings precede rising unemployment. When the focus is on inflation, watch CPI/PCE. When the focus shifts to employment, these labor metrics become the primary market movers.
NFP (Non-Farm Payrolls) shows monthly job creation — positive NFP means economic growth. Unemployment Rate is a lagging indicator — it confirms what has already happened. Initial Jobless Claims (ICSA) is a leading indicator — rising claims signal economic deterioration before other data catches up. JOLTS (Job Openings) measures labor demand — falling openings precede rising unemployment. When the focus is on inflation, watch CPI/PCE. When the focus shifts to employment, these labor metrics become the primary market movers.
We don't read these ETFs as trading opportunities. KBE tracks the large US banks (JPMorgan, BofA, Goldman Sachs) — it's the thermometer of the big banking system. KRE tracks regional banks, far more exposed to commercial real estate, SME lending and local funding — it's the canary in the coal mine for credit risk. The divergence is the key signal: if KRE drops while KBE holds, the peripheral banking system is under stress before the problem becomes systemic (see SVB crisis 2023).
IXG covers banks, insurers and asset managers from the US, Europe and Asia. It's not a trade — it's a thermometer of global financial health. A strong dollar compresses non-US financials, a weak dollar gives them relief. Useful for seeing how global liquidity flows reflect on the international financial system.
IAK tracks American insurance companies (AIG, MetLife, Prudential). Insurers are mega institutional investors with balance sheets exposed to Treasuries and corporate bonds. If yields rise too fast they suffer mark-to-market losses. It's a proxy for long-duration rate risk and the soundness of US institutional investors.