How To Macro (Part 2)
Finding the Regime Before Building the View
Macro does not start with a trade idea. It starts with the environment.
Before I care about the next CPI print, payrolls number, central-bank meeting, or equity-market move, I want to understand the regime I am operating in. Is the market worried about inflation? Growth? Credit? Liquidity? Fiscal pressure? Currency credibility?
The same data point can mean completely different things depending on the regime. Weak economic data can be bullish in an inflation regime if it reduces the need for rate hikes. But the same weak data can be bearish in a growth or credit regime if it confirms demand is breaking.
That is why my first step is always simple:
What kind of market (regime) am I in?
The rest of the macro process depends on getting that question broadly right.
In Part 1, I wrote about the macro mosaic, the idea that macro is not one data point, one chart, or one heroic forecast. It is a process of putting different tiles together rates, equities, credit, currencies, commodities, liquidity, positioning, and policy until the picture starts to become clearer.
The first step in that process is regime recognition.
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